US conglomerate says Asean will be transformed


  • Corporate News
  • Saturday, 18 Apr 2015

Rice:

US conglomerate says Asean will be transformed

GENERAL Electric (GE), the US-based multinational conglomerate, is looking at sustaining its commendable growth in the Asean region and will continue to explore more business opportunities when the Asean Economic Community (AEC) kick-starts this December.

Its vice-chairman John G Rice says GE fully supports the formation of AEC, which is positioning to become a highly competitive and dynamic economic region.

“We view the AEC transforming Asean into a region with free movement of goods, services, investment, skilled labour and freer flow of capital.

“Hence, GE is very much a supporter of AEC, which has the potential of reducing trade tariffs and barriers,” he tells StarBizWeek in an exclusive interview during his visit here in Kuala Lumpur recently.

Despite operating in an increasingly competitive environment and new challenges, GE over the past 10 years has been successful in growing its businesses substantially across Asean.

“Our business (performance) today is probably three to four times what it was some six years ago. So, the growth for GE here has been terrific so far.

“Of the total GE global operations in 175 countries, nine are located in the Asean region thus reflecting its significance to the company’s growth expansion,” says Rice who also the CEO of GE Global Growth and Operations based at the GE Global headquarters in Hong Kong.

While the commendable success of GE as a company can be attributed to the continuous focus in coming up with the right products and technology as well as the ability to market them effectively, he points out that “the great people (its employees) on the ground” also played an important part to the company’s continued growth success story.

“This is well reflected by our 7,500 employees here in this region. In fact, we have also developed strong regional teams.

“If you look at GE team leaders in each country, they are long-time GE employees but a majority of them are locals from countries such as Vietnam, the Philippines, Thailand, Myanmar, Cambodia and Malaysia, among others.

“So everywhere we go we want to bring global capabilities and strength where GE can cut across its business verticals and develop it together with the local capabilities and talent there.”

Hence, by having the right product mix, technology, strong regional teams on the ground, Rice says GE could then continue to foster good relationships with its existing important customers as well as expand both the existing and new partnerships within the Asean region.

“Business has changed a lot in the past 30 to 40 years when a time big companies like GE had fewer partnerships.

Now, it is important for GE to seek out for more important partnerships that support our customers, partnership with our customers and partnership with other companies that can form new basis for our highly diversified businesses.

“And in the 21st century, companies like ours will have to invest intensively in Research and Development, Technology as well as undertake more important businesses in full collaboration with other companies,” explains Rice.

While GE is currently restructuring its financial business, Rice acknowledges the need for financial services to support core infrastructure-related activities in emerging markets.

“There’s a huge need for infrastructure globally and figuring out how the world is going to finance it is a significant issue.

The Asian Infrastructure Investment Bank (AIIB) initiative has garnered significant support from major Asian countries and aims to rival the World Bank and Asian Development Bank.

“Asia is an incredibly important market and they need the infrastructure as well as the creative ways to get it financed. We support the concept of an AIIB and want to be helpful and participate in the infrastructure projects that it funds.

“These infrastructure projects are mostly needed by countries which have a growing middle class population. Hence, the Asean region somehow fit hand-in-glove with this GE strategy.

As of to date, GE has invested about US$4bil in Asean.

“While this figure may not be so substantial, GE will continue to explore new opportunities to invest in this region,” adds Rice.

Malaysia in focus

Tenaga Nasional , Air Asia and Petronas are just some of the industry heavyweights that partners GE in various ways.

According to Rice, the most recent investment to service GE’s oil and gas industry customers in Malaysia and around the region is the newly set up GE Remote Monitoring and Diagnostic Centre located at it’s KL Sentral office, Kuala Lumpur. The iCentre that was launched last year monitors over 800 gas turbines and compressors in 27 countries around the world.

“We have been able to alert our customers to issues even before they know about it, helped fix problems where possible or take immediate action to alert our customers to take remedial actions.”

In short, the diagnostic centre which uses the industrial internet capability allows a group of GE engineers to work closely together with its oil and gas customers to track the performance of their GE equipments.

“The whole idea is to avoid the down time of our customers’ equipment by predicting when the equipment needs to be overhaul and service.

“The service has helped our oil and gas customers reduce downtime which in turn translated into a massive amount of savings in terms of capex.

While Rice admits that the slump in the crude oil prices has created a more challenging environment for the group’s oil and gas business, however, GE customers in other businesses which mostly rely on fuel such as aviation, rail and locomotive sectors were not badly impacted.

“On the balance side, most of the countries we do business are net importers of oil so many are in advantage situation.

“So, the aggregate impact on GE, it is kind of neutral.”

Having said that, there is still opportunity for GE’s oil and gas division to do its business differently when the company goes through this cycle.

“We will do some restructuring if necessary - to sharpen our pencil a little bit. All our businesses have gone through these cycles, and will take the opportunity to get better, stronger and be positioned for an accelerated growth when the (bad) cycle ends and business environment starts to recover.”

The GE Store concept

The GE store concept, simply put is an enterprise advantage that will benefit the company as a whole.

It means that every business in GE can share and access the same technology, markets, structure and intellect.

The value of the GE store is captured by faster growth at higher margins; making the totality of GE more competitive than the parts.

GE has advanced the four big concepts of The GE Store - Advanced Technology, Service and Software Capabilities, Global Footprint and Simplicity - which is aimed at connecting the company across its diversed businesses globally.

Under advanced technology, Rice points out that when GE developed leading material science technology for use in jet engine, this technology can also be shared in the oil and gas business for use in the turbo machinery.

“Petronas for example can get the benefit of the GE turbo machinery equipment for use in its oil and gas pipeline, well drilling and even, power generation operations.

The common technology that is developed by the GE Research Centres allows us to push it across the company’s diverse businesses.

“Basically, through this shared technology, if it works for the aviation operation than it can also be spread across to others such as the oil and gas and power generation activities.”

These technical developments are spread across the company to allow advantages of a multi-industry company to have a broader global footprint.

The second leg of the GE Store is the service and software capabilities. Rice points out that businesses are now more focused towards the lifecycle cost of equipment such as compressor, turbo machinery, gas engine or wind turbine.

“Many of our customers are realising that the lifecycle cost of the machinery is important in order to maintain the operation of the machinery to make them last for the next 20 to 40 years.”

GE has invested tremendously in its service capabilities to reduce the lifecycle cost of its customers’ machinery. In addition, the industrial internet is applied where it could solved the digitial internet that will allow GE to undertake remote monitoring and diagnostics to anticipate the upcoming problems.

“So we can leverage these capabilities across the multiple GE businesses -aviation, oil and gas or power generation - where a lot of the ways you managed the data for the respective areas are sharing a common platform,” adds Rice.

The third part is GE global footprint where the group can bring capabilities to support important customers like Petronas and others.

Annually, GE spends about US$1bil in the training and development of its employees globally.

“So this notion of having a global footprint is that when a customer (company) deals with GE Malaysia even though you are dealing with a set of local capability but behind it, there is a global strength which is benefitting the customers.”

As for the final concept - Simplification, Rice says GE is designing processes which can achieve the utmost efficiency for better performance at lower cost.

“The idea is to efficiently run businesses both horizontally and vertically thus enabling more value creations for both GE customers and its shareholders.”

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