Speaking at GE's Annual Outlook Investor Meeting, Immelt explained how his company plans to emphasize its "competitively advantaged businesses" by investing in adjacencies, preserving high margins and leveraging GE's massive installed base.
"The company is a vertical company and a horizontal company," he said. "We have great businesses, and we run them from a standpoint of an enterprise."
Immelt outlined six growth drivers for the company in 2011:
- Lead in technology.
- Leverage that technology and have great service revenue.
- Build out leadership in the key growth markets.
- Expand the core of the company through infrastructure adjacencies.
- Run a very good and disciplined and valuable specialty finance business.
- Solve problems for customers in society.
Immelt also said GE's doubling down on innovation investment, adding $1 billion in 2011. (He also mentioned that GE benefits from customer-funded R&D.)
Immelt said GE was spending five to six percent of revenue to produce "a broad and deep pipeline of new products" positioned to gain market share and preserve margins.
"Being able to do what I call reverse innovation, which is more products and more price points, we can now deliver products at value price points with 50 percent and 60 pecent contribution margins, which is something the company couldn't do five or ten years ago," he said. "Just lower costs and higher margins."
Immelt then broke down GE's businesses by sector. Speaking about the energy business, Immelt said a "tremendous diversity of technology," a team of 15,000 engineers, lots of patents and "a big spend" means that GE will expect $3 billion to $4 billion in orders over two years.
"We've dramatically diversified our power generation product line and distributed it into energy and wind and oil and gas," he said. "Next year, we'll launch new large-frame gas turbines, more distributed energy, more service products."
Immelt also noted how GE has diversified its revenues, moving from selling gas turbines in the U.S. to multiple products in multiple regions.
"In Aviation, we've got launches in the GEnx engine, the LEAP-X, which will go into the narrow-body, new avionics products," he said. "Make no mistake. We are winning big in Aviation and we will win big through this cycle."
Immelt also spoke to GE's healthcare business, highlighting several products in the pipeline:
- New segments with extremity MRs and portable ultrasound products.
- A new product in digital pathology.
- A growing lineup of Brivo low-cost products for emerging markets.
- The January launch of a home health venture with Intel. "This gives us a chance to compete with Philips and the other players in the home health market."
"It's really a technical density game in many ways," he said. "We continue to fund what's next in core diagnostic imaging. And that's molecular imaging, and the Clarient acquisition kind of feeds into that in terms of being able to marry medical diagnostics and imaging for good growth in the future."
More points about GE's myriad businesses:
- Clean energy: Continued investment. "We're going to be one of the winners in smart grid. Our smart grid products continue to grow 30 percent."
- Electric vehicles: "We're going to be, pardon the pun, in the front seat of the car as this market develops."
- Unconventional fuels: "We're doing a lot of work around shale gas and oil sands where the -- these are going to massive water markets as time goes on."
- Home appliances: Continued investment in energy-efficient appliances.
- Healthymagination: "Using cost, quality and access has done a better job of directing the products that we make." Also: "It's an industry that has tended over time to be driven...like an arms race."
Immelt then offered outlook for each sector. He said the transportation and healthcare sectors would see good growth, and energy and aviation would see "flattish growth."
- Energy was $7.2 billion in 2010. "The U.S., from an energy standpoint, has had a tough couple of years...we're doing a little bit of business in the U.S., but not much."
- Oil: "A good new product pipeline, new gas turbines and distributed energy, strong M&A pipeline in the energy business."
- Wind and thermal energy: Down in 2011. "Pricing will be tougher next year. But we'll see good deflation at the same time."
- Offshore wind: "It is very likely that GE has a 25 percent market share by 2015. Twenty-five percent market share will get you about $3 billion in revenue. We need to do this in a low-risk way."
- Solar: "Solar is a crowded field. We invested in a start-up company. We're now demonstrating the efficiency of our cadmium telluride panels, and our research center is -- reached 15 percent [efficiency] and growing. We've got something that looks good, that looks competitive. Again, five percent share in this business is $2 billion or $3 billion by 2015."
- Overall: goes positive in 2012.
- "We see more certainty in the market. The growth markets are fantastic."
- "We're counting on a European market that's not as strong next year."
- "We're well positioned in adjacencies," such as molecular diagnostics and imaging, CT dose reduction, healthcare IT.
- Overall: recovery in 2012.
- A "really good" market with "lots of new airframes and new planes being discussed; Airbus narrow body and all kinds of stuff going on."
- Overall: goes positive in 2012.
- "A big snap-back year in 2011" with an improved North American market.
- "We've got to heavy up R&D and transportation between now and 2013."
- Overall: recovery in 2012.
- Energy Star: "If [the home market] gets better, then the appliance market will get better."
- Investment in lighting.
Finally, Immelt spoke about "doubling down" on investment in emerging markets and the BRIC nations -- especially China, which for many multinational companies like his is the elephant in the room.
"Playing in a lot of these markets is a big company game, and so we're quite comfortable and we're able to use the breadth of the company to our advantage," he said. "We really use the global supply chain as a way to drive good profitability and low cost."
Immelt said he sees "good opportunities" in the Middle East and Turkey, while Africa a more flat trajectory next year.
- "We've got some good opportunities in Russia next. Russia is going to reframe and reinvest in their electricity grid. It's the least efficient electricity grid in the world. We see some good opportunities there."
- "Latin America, Brazil is extremely exciting, but there's other countries in Latin America that are quite good."
- "India has just blossomed in the last year, and we see good momentum continuing into the following year."
- "Australia is just a boomtown for us right now in terms of all the oil and gas and energy."
- "We see some excellent growth in China in 2011."
- "We'll grow high double digits next year in China. But there's no one strategy in China."
- "They're investing a lot in healthcare in China...we're as good or bigger or better than anybody."
- "We can just pour it on in healthcare in China. This is going to grow. We're going to invest. We're going to localize. We're going to have a tremendous presence in China there."
- "You can source LED lighting on just about any street corner you want in China."
- "We're going to partner with state-owned enterprises in place like the rail industry, transmission and distribution."
- "This is going to be the biggest commercial aviation market in the world. The question; is it five years or ten years, but I can say with great certainty and we want to be on the ground, well positioned to win in aviation."
Immelt closed his presentation by emphasizing GE's long-term strategy of using its largesse and relationships to drive better value over a longer period of time.
"When you're GE, you don't have to do it in a day," he said. "You can do it in a decade and still have a lot of customers that want to buy your stuff. Right? And so, we do that."