The interests of Obama and Immelt—the GE chief and new jobs adviser—increasingly overlap
Source: Bloomberg Business Week
By Diane Brady and Rachel Layne
Jeffrey R. Immelt might have expected some blowback. With unemployment still high and a charged political atmosphere in Washington, anyone asked to chair a new President's Council on Jobs and Competitiveness was likely to face scrutiny. Sure enough, when President Barack Obama named the chief executive officer of General Electric (GE) as his choice on Jan. 21, Immelt was labeled a crony capitalist by the right and a destroyer of American jobs by the left for his decision to close plants in the U.S. in recent years. Others wondered how he would dispassionately manage his new role while running a $150 billion-a-year company under enormous pressure from Wall Street.
From the Oval Office, the answer is clear: What's good for GE is good for America. The company, says White House senior adviser Valerie B. Jarrett, "is competing in a global marketplace, and it is winning. It's moving jobs back to America, it's exporting goods all over the world, and that's really the model that we think is ideal."
The Immelt courtship started during Obama's Asia trip in November. At a meeting in India, Immelt had a chance to see the President advocate for U.S. companies, while Obama got a closer view of GE's success in selling big-ticket products abroad. More than half of GE's sales and its 304,000-strong workforce are outside the U.S., and the company rang up $17 billion in exports from its stateside operations last year.
Obama called Immelt, 54, from Hawaii during his Christmas vacation and asked him to take the helm of the new council. After running the idea by GE's board, Immelt called the President back a few days later to accept.
To some investors, taking the role is practically a fiduciary duty. Stephen Hoedt, a Cleveland-based analyst for Key Private Bank, whose parent company owns 17 million GE shares, says Immelt may be "able to affect policy at the highest level." Brian James, co-head of research at fund manager Loomis Sayles, says he hopes Immelt, a Republican, gets "some insights into what's going to impact GE coming out from Washington," adding "this appointment simply can't be bad for GE."
Just how much access—and success—Immelt will see is an open question. Fostering job growth is a challenge that has confounded the brightest minds. Immelt has agreed to chair an advisory group that may not wield much influence. The panel it replaces—the President's Economic Recovery Advisory Board, on which Immelt also served—met with Obama four times during its two-year lifespan. The new council is scheduled to meet with the President once a quarter.
For GE, there could be many side benefits. The interests of Immelt and Obama increasingly overlap. Immelt needs the right policies in place to drive growth in areas such as infrastructure, cleantech, health care, and finance. Sales of wind turbines and solar panels are tied to U.S. energy policy and emissions standards. Decisions over whether to upgrade the power grid, invest in high-speed rail, buy jet engines, or modernize hospital systems are often made at a political level.
What Obama does or says on the world stage is of great interest to a company that needs open borders and political goodwill to thrive. As Gwen Ruta, who heads the Environmental Defense Fund's Corporate Partnerships program, says: "It's a short hop from his thinking about GE's strategy to where the jobs are going to be."
Advising the President on job creation could prove fruitful for GE in other ways. Immelt's mandate touches on a host of issues important to a company that spent $39.3 million last year lobbying Washington, more than any other corporation, according to the Center for Responsive Politics. In a Jan. 21 call to discuss fourth-quarter earnings, Immelt said he'd focus on such areas as competitiveness in jobs, exports, global tax policy, regulations, and manufacturing. "I'm honored to be able to work on something that has importance in a broader economic context," he said. While he must keep GE's business and the council legally separate, stronger bonds might not hurt when GE is battling the Administration on issues such as continued funding for an alternative engine for Lockheed Martin's (LMT) Joint Strike Fighter.
Although critics such as Representative Marsha Blackburn (R-Tenn.) may disagree with the decision to have Immelt lead the council—she argues a small business owner or entrepreneur "may have been a better fit"—the GE chief certainly shares Obama's focus on job growth through green technology, infrastructure spending, and increased efficiencies in health care. "People want to see business and government work together, both in the U.S. and globally, to drive innovation, employment, and growth," Immelt wrote in a 2009 letter to shareholders. In the last two years, GE has announced plans to add some 6,500 manufacturing jobs in the U.S.
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In some ways, Immelt is starting to sound like a politician himself. Whether in speeches or op-ed pieces, he talks about the need for a national policy to create jobs from exports. Immelt has more time to spend in Washington—when not calling on other government leaders—after moving Vice-Chairman John Rice to Hong Kong in early January to lead GE's global operations. Given the uncertainty in GE's home market, not to mention opportunities to participate in earmarked projects and policy debates, Sterne Agee analyst Nick Heymann argues, Washington is a good place for Immelt to be. "This is where the opportunities to influence are," he says.
The bottom line: With its focus on infrastructure and cleantech, Immelt's blueprint for jobs dovetails with Obama's policy agenda.
With Julianna Goldman, Lisa Lerer, and Jonathan D. Salant. Brady is senior editor at Bloomberg Businessweek in New York. Layne is a reporter for Bloomberg News.
