GE won’t sell more local units: Rice

General Electric has no plans to sell any other Australian businesses, according to its head of global operations.

General Electric has no plans to sell any other Australian businesses, having offloaded GE Capital last week for $8.2 billion to a private equity consortium, and its head of global operations, John Rice, says the deal does not mean GE lacks confidence in Australia.

In a video interview recorded exclusively for The Australian and Business Spectator, Mr Rice said the sale was motived purely by the need to have a smaller financial services business.

“We understood that we needed to downsize financial services after the global financial crisis — our investors were telling us that, so we were working towards it and took the opportunity to find a good home for the business in Australia.” he says.

“We have no plans to exit any other Australian businesses, although we’re always looking at the right mix for the portfolio.”

The downsizing of GE’s financial services business is part of the restructuring of this 130-year old manufacturing giant that has been going on ever since Jeff Immelt took over from Jack Welch as chairman and CEO in September 2001 — four days before the 9/11 terrorist attacks.

Immelt has spent much of the past 14 years talking about the difference between a 20th century corporation and a 21st one, and trying to turn GE into the latter, and yesterday Rice — who also has the role of GE’s vice-chairman — put some more flesh on that idea.

“The real global currency,” he says, “is not US dollars or euros — it’s jobs”.

“If you’re not creating employment, then governments are not interested. If you’re not creating jobs, then your ability to have a sustainable growth model is severely diminished.”

He says governments have also figured out that global enterprises like GE cannot only help them create jobs but should be required to do so.

“It was considered in the 1980s and 90s an offset agreement, so if you if you got a contract for $100 million and it had a 30 per cent offset requirement, you had to buy $30 million worth of something.

“It could be paperclips and pencils. Today, it’s training, it’s capacity building, it’s creating a lot more value, and honestly we don’t see it as an obligation in the sense of something that is a check the box exercise; it’s important that we do it and, frankly, the world’s going to be better off if we do it.”

The other big change for modern corporations that Rice identifies is the faster pace: “In the 80s and 90s we could refer decisions back to headquarters and wait for an answer. We can’t do that today — everything is happening far too quickly.”

Rice says GE is examining every step of its processes because “for us this is part of what it’s going to take to be a successful global company in the 21st century. You just can’t do business the same way.”

Against that is the huge pressure on companies to be more productive and efficient: not only do global corporations have to decentralise and become more local, they have to do it in a way that is more efficient, which can seem like a contradiction in terms.

Rice says it’s about getting the right balance between global and local.

“We’ve built GE based on strong global capabilities around technology, human capital development, our brand, our business practices and transparency, and those are things which should apply everywhere.