GE rebound to focus on power, aviation and health care: CEO
Nuclear joint venture with Hitachi to play part in earnings recovery efforts
SOICHI INAI, Nikkei staff writer
NEW YORK -- Despite a sharp stock price decline following an announcement of aggressive turnaround plans Monday, General Electric Chairman and CEO John Flannery remains firmly committed to restructuring the conglomerate around power and other core operations.
Calling nuclear power a core business, Flannery indicated that a GE joint venture with Japan's Hitachi will continue to contribute to the parent's earnings by pursuing business opportunities in such fields as repairs and maintenance of nuclear reactors.
Edited excerpts from his interview Monday with The Nikkei and others follow.
Q: I'd like to ask you about nuclear power, in which GE has a joint venture with Hitachi. Do you see the nuclear power business as a core business?
A: I put it in the mosaic of the overall power business. Renewable power, coal, gas, steam -- we look at each one of these. I'd say the long-term prospects for new nuclear units are relatively limited. There's a good service business inside, servicing the existing nuclear power plants. So I'd say that's an asset we'll continue to look at.
Q: Are you interested in a stake in Westinghouse Electric?
A: We're not looking at taking a stake in Westinghouse.
Q: GE stocks plunged following the investor update on Monday.
A: Well, first of all, I'm not surprised. We announced a major cut in our dividend and a major cut in our guidance for 2018. We're disappointed with those results and those developments. I think that's reflected.
I'd say going forward investors should look at the other parts of the story. [We will bolster our focus] in the strongest businesses that we have, in the end markets that have secular growth, and the businesses that have good margin potential. Power, aviation and health care, those are three really strong franchises. The, you know, horizontal things, obviously, the digital and the additives. We're running the company for a new era.
Q: What do you hope to accomplish by narrowing your focus?
A: This is all really in the context of making us simpler and easier to operate. Complexity hurt us. We are focused on strong end markets in areas [where] we have competitive advantages.
Q: Is there any way to speed up this turnaround? Particularly in the field of power?
A: I look at three things: the market environment, our [technological] competitiveness, and how we've run the business. You're well familiar with the trends in the market, and those I think would persist in 2018, 2019.
We [GE equipment] generate one-third of the world's power. We've got an incredible stock base. And again, as we said earlier today, many people wanted us to sell aviation after 9/11. Many people wanted us to sell health care. And so, that's ... a material asset that has to be run better, first and foremost. And then we'll continue to evaluate the long-term prospects for us. But ... these assets run for 20, 30, 40 years.
Q: What about the digital business?
A: I want to be clear, there's no retreat on the idea of digital. There's growing conviction, and I would say evidence, of what we can do with digital with our customers, the outcomes we can get. This is purely a factor of focusing on a handful of the applications into our install base. That's where we're seeing much higher commercial traction, much higher cycle times. In 2018, we'll spend about $400 million less on this. But we think that Predix [an "internet of things" platform] revenue will double in 2018 to approximately $1 billion.
Q: There have been reports that GE may sell GE Capital Aviation Services, your aircraft leasing unit.
A: That was rumor. I don't know where it started or whatever, but it obviously got coverage.