GE CEO on Energy Policy

GE CEO Jeff Immelt is quoted at the Gridwise Global Forum, "This is a great country. But, you know, we have to have an energy policy. This is just stupid what we have today." I hope that he doesn't apologize later for his remarks, and I also hope that his refreshing candor stimulates some response from his fellow CEO's who either produce or use energy, which is pretty much every company.

In talking about clean energy and reduced greenhouse gas emissions, it is difficult to conceive of meeting any environmental goals without having a place for nuclear energy. In this respect, it is curious that we always cling to European examples when we bemoan our own health care industry. Yet, we ignore the European model when it comes to nuclear energy. Almost 80% of French electricity is generated by nuclear power. Wind and ethanol won't make a meaningful difference to the total energy demand in the U.S. for the foreseeable future. While coal is abundant, the problems with cleaning the coal and then sequestering CO2 byproducts are expensive, technologically challenging and potentially very harmful to the environment. Granted that GE is talking its book to some extent, given its leadership in nuclear power, but we applaud Mr. Immelt's taking the discussion to the public forum in a decisive fashion.

He did say something that might be confusing for GE shareholders, and that is that he no longer sees GE as being exclusively a purveyor of high end, expensive products in its market segments. Rather, in the future, he wants to have "the value product all the way up to the high end product" in every segment, to keep out the Indian and Chinese competition. I think this is both bad strategy and bad economics. If Indian and Chinese companies can, for example, produce low price, low margin, low tech consumer appliances for their own markets, then why not let them? This is the law of comparative advantage. If GE can bring to bear innovation, technology, and high quality manufacturing for demanding customers in any country, why not focus on this? Over time, it will be interesting to learn what he meant by this remark.