GE will continue to bet big on India, CEO John Flannery told Vinod Mahanta. The Narendra Modi government has brought about a notable difference in ease of doing business and GE's diesel locomotive factory project in the country is on track, he said. Flannery, who led GE's business in India between 2009 and 2013, said there won't be any job losses in the country during the company's global restructuring. Edited excerpts:
The Modi government has ushered in several reforms and programmes like the goods and services tax (GST) and Make in India. As a strategic investor, do you notice any change on the ground when it comes to ease of doing business?
We see a big change and it comes up in our numbers. We see the recent tax changes, the general responsiveness of the government, the willingness to work with business and the community. It's a symbiotic relationship because I see more confidence in the local business and investing. There is a better sense of what to expect and it feeds on itself. I have been doing business in India for 20 years, now I see the economy is strong and the confidence in government is strong. When I got here in 2009,the business was $700-800 million. We are going to be six or seven times that this year.
India's all-electric push in railways could lead to substantial costs for GE, which is manufacturing diesel electric locomotives in the country. Has the government given any assurance that GE's investment will be protected?
As the project goes ahead, we have a contract with the government. We are executing that contract and are on, or ahead of, that schedule. We expect the project to unfold as was listed in the tender and we will execute to that. The government has a longer-term agenda to electrify, I understand that, but there will be a role for diesel for some time. Electrification will take some time. I think the desire for long-term electrification and execution of our contract are not mutually exclusive. Every interaction we have had with the government has been affirmative of our contract.
And the changes that you're making worldwide — you are divesting many of the businesses — won't that affect the diesel project?
That's one of the businesses we're considering doing something with... our locomotive and transportation business globally. And we haven't come to any decisions yet but that's possibly something we could own or participate in some different form than we do today. It won't affect our execution of the project here, so it would be more at a parent company level.
Will GE keep up investments in India despite major restructuring activities at the global level?
Our global structuring activities and restructuring activities really don't impact India. We have a very bullish outlook on our businesses in India as a commercial market, so we continue to develop products, create distribution, beef up sales. And the other two ways we look at India are as a research centre hub and as a supply chain and manufacturing centre. We announced recently that we have nine global research centres — we are concentrating on those, they will now be cut down to two. One in the US and one in Bangalore. We will have, let's say, expanding activities in Bangalore. I see a big promising future for India's manufacturing and supply chain part of our company. I was in Pune this morning — we got and built a large multi modal/ multi-business factory there and that's quite successful today. So, more investments there.
You have joined hands with the Tata group. Are your looking at more such joint ventures with Indian companies and in which Indian companies and in which spaces?
Nothing specifically. I would say one of the things that has changed in the last 10 years of my career, it is just a move to more partnerships, more ecosystem kind of environment, so I would expect more. But we don't have anything specifically planned or identified for it.
Will there be more divestitures in GE's India business after the company moved out of the capital and card businesses?
I wouldn't expect that. The card business stake sale was part of winding up global financial services investments. We sold the main body of GE Capital in one transaction and credit card ownership in a separate transaction. Those are related to a broader global financial services strategy.
GE has been one of the earliest and biggest strategic investors in India. Has the India investment paid off for GE? Have the returns till now justified the investments?
I am very bullish and I have been bullish on India for a very long time and I see our own business growing very substantially. Maybe it took some time for our businesses to come together but if you look again today: very strong commercial activity, very strong research activity, very strong supply chain and sourcing. Our business is thriving in India. When I look back, I remember telling Jeff (Immelt) in 2011, it was an erratic time in that period, that in healthcare, in aviation, in power, the 10-30-40 year outlook for the country is very strong. You know, if I had a world full of Indias, I'd sleep well.
As part of the global restructuring, especially in GE Power, would there be job losses in India?
I don't expect anything material here. There could be some tiny things around the edges, I'm not even aware of that. But certainly major parts of the restructuring are outside of India.
GE's performance is dipping and you will have to take some hard decisions. Jack Welch built GE into a sprawling conglomerate, Jeff Immelt spent his tenure simplifying the structure. How do you plan to restructure the company?
We are a 125-year-old company, we have changed in major ways. Many times, it was the businesses we were in, the form we were in, and sometimes the percentage mix. So we are going through now something we have gone through repeatedly over the history of the company. My main theme is really just trying to focus on current portfolio more. I felt like we are in too many businesses at once and the world is moving too fast or too much change to have, I think seven-eight businesses... And underneath those, most of them are four-five substantial businesses. So we are probably managing at one level 30-35-40 business units. I just felt like there was too much. So power, aviation, healthcare... these are long term macro trends, big global businesses, we are no. 1 in every one of those businesses. That is something to build around, we want to support that with converting them into digital industrial franchises and the thing we call additive manufacturing. That is an incredible powerhouse of a portfolio. Other parts of our company are strong, transportation business, an excellent oil and gas company. We'll find the right environment for them and ownership form for them but it's too many things I thought.
What kind of bets are you placing to make this elephant dance?
Yeah, so if you look... industrial internet of things is one, additive is another, if we can talk more about the substantial bets. This is really going to transform the way people manufacture things, design things, the way supply chains works, the way inventories are carried. This is going to transform the businesses we are in, but it's going to be a sweeping change globally. We have bought three companies in the last year, we are the leading self-practitioner - the word we are using heavily inside the company right now. We take the learning we have, doing that allows us to... operate this as a business externally right now. Sell the machines, sell the consulting services, we are in the metals part of the additive printing business.
So that is going to be a, you know, kind of a horse and buggy car moment in the manufacturing business, I think for the next 100 years. That we are deeply committed to. If you look in healthcare, heavy emphasis on our life-science business, celltherapies... something we are investing heavily in — immunotherapy. And supporting that, heavy investment in artificial intelligence, machine learning, applying that in a healthcare setting. The core businesses are transforming in very futuristic ways. You know, our aviation business, very interesting things are going on, and unmanned vehicles, drone technology and things like that.
So, even in the traditional businesses' there is very dramatic evolution inside of those, if they pan out the way we expect, they are going to be long-term strong growth businesses.
It is said that GE is a good indicator of global economic health given its vast footprint. What's your take on the state of the global economy?
The global economy right now is very strong. The US is gaining strength, Europe is pretty solid. I was in Japan earlier this week, surprisingly strong exports picking up, stock market up, confidence up, consumer activity up. Those are three markets that have been relatively flat for a decade — all three of those picking up. And then you get back to the stronger BRICS market—India very strong, China very strong, we are big in the Southeast Asia markets, they are very strong. Latin America, you know, Brazil's tough — I see the broad picture — Africa strong. The broad macroeconomic picture now is as good as it's been, certainly in last 20 years in my career.
Did the India stint help you become a better leader?
I have lost some weight here (laughs). It made me better understand customers. While we may think there are specific things a customer wants, in reality customers have different context, different environment, different aspirations, different capabilities. I spent a lot of time understanding that it's not a one-size-fits-all. I also got to see the company from what I call the other end of the telescope. What's it really like to be out on a fringe of the company, really in front of the customers ..
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