From SCDigest's On-Target E-Magazine
Feb. 13, 2013
Supply Chain News: GE CEO Jeff Immelt on the State and Future of US Manufacturing
US in Best Relative Position in 30 Years, Immelt says, but Don't Expect a Flood of New Jobs; Difference between Globalization and Outsourcing
SCDigest Editorial Staff
Jeff Immelt, CEO and chairman of industrial giant GE, has been front and center on the issue of US manufacturing and related job creation, as GE made some high profile moves to return some manufacturing work to the US in recent years, and as Immelt himself was a high profile member of the US Council on Jobs and Competitiveness, a group that was disbanded by the Obama administration just a few weeks ago after at best dubious results.
People are therefore eager to hear what he has to say, and Immelt recently sat down for an interview with The Economist magazine's US manufacturing editor Greg Ip at a conference on US manufacturing sponsored by The Atlantic magazine.
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"When you look back at manufacturing and putting it in different places, just for the labor arbitrage, the record is mixed in terms of results."
Jeff Immelt, GE |
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What Do You Say?
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Ip started by noting that Immelt had not long ago stated his commitment to "Making advanced manufacturing capability a core strategic competence at GE."
Ip also said that while there seems some anecdotal evidence that there is a resurgent US manufacturing sector, with 400,000 new manufacturing jobs over the past couple of years, the reality is some six million industrial jobs have been lost over the past decade or so.
How does Immelt see it?
There are really two questions there, Immelt said.
"Is the US as a manufacturing location more competitive than it has been in the past? I think the answer is Yes," Immelt stated. "There are a number of drivers for that. In high tech manufacturing, material innovation is happening. There is also a lot of innovation in "advanced" manufacturing. Materials as a percent of the cost structure of products is much higher than it has been in the past versus labor. The energy construct is changing here due to shale gas. The ability of US companies to sell around the world and export to markets that are growing is increasing."
As a result, "When it comes to manufacturing, the future has the chance to be different than in the past, when it comes to the United States," Immelt said.
"We are probably more competitive from a globally relative basis than we have ever been during my 30 years at GE," he added.
The second part of the question, Immelt said, has to do with how does more competitive manufacturing here translate into jobs.
"That is a very complicated question that involves productivity and many other issues," Immelt said.
While manufacturing here is likely to gain strength, will manufacturing jobs go from about 9% of total US jobs currently to the 20% where it was 30 years ago?
Unlikely, Immelt said.
"But could we see a steady increase in manufacturing jobs over the next quarters and years? I think that is likely to happen. I do think there is a bigger opportunity for more content from the USA today," Immelt told Ip.
Ip noted that former and legendary GE CEO Jack Welch (Immelt's predecessor) once said that the ideal manufacturing strategy would be to put your factory on a barge, and move around the world to whatever location had the best competitive operating environment at the time.
There seems to be a sense now, Ip said, that maybe that thinking went a little too far. Did GE take it too far, Ip asked, and is why now GE and some others seem to be reshoring?
"I don't think about it so much in terms of offshoring or reshoring. I think about it in terms of competitiveness, and where and how you have to compete globally," Immelt said.
Globalization versus Outsourcing
"There are two different things," Immelt continued. "The first is globalization. When you try to sell your products globally, you often have to put people in those markets."
(Manufacturing Article Continued Below)
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That scenario, he said, is different than outsourcing, "which is arbitraging labor to try to gain competitiveness. I would say that's largely what was done in the 1980s and 90s. But I would say almost everything we have done in the last decade has been about how to access local markets." Immelt noted.