General Electric Co.’s chief executive, Jeff Immelt, told shareholders on Monday that the company’s relocation to Boston is part of a broader effort to keep corporate operations streamlined and connected with the rapid pace of change in technology.
“We must be in the world of ideas, so that we remain contemporary and paranoid,” Immelt wrote in a letter to shareholders. “This is behind our move to Boston. We plan to keep our corporate costs low — less than 2 percent of revenue — but having a big impact.”
By “paranoid,” Immelt is suggesting GE should not be complacent just because it’s one of the biggest companies in the country. He sees the move to Boston as a reflection of the transformation already well underway at GE, one that he recapped in his letter as an argument for buying and owning shares in the company.
A letter from Immelt goes out to shareholders every year around this time, along with the company’s annual report. This time it comes as GE is preparing to relocate its headquarters to Boston from its longtime home in Fairfield, Conn. Tax policies in Connecticut played a role, as did a package of incentives valued at roughly $150 million from city and state officials in Massachusetts. But Immelt said the biggest reason is to become part of Boston’s high-tech “ecosystem” as he shifts the industrial conglomerate’s priorities.
His letter underscored the reasons he is narrowing GE’s focus to high-tech industrial work. Immelt has sold GE’s ownership in NBC, he is selling its appliance business, and he is exiting most of the company’s financial businesses.
“In a slow-growth world, there is no case for an unfocused conglomerate,” Immelt said.
He did make a case for one big acquisition, the purchase last year of the French company Alstom’s energy business. He said Alstom makes GE more competitive, in part by giving it economies of scale as it searches for big energy customers.
But Immelt made it clear he isn’t counting on acquisitions for GE’s growth. Instead, the company is investing more than $10 billion each year in research, development, and capital expenditures.
He singled out GE’s new lighting technology and energy business, known as Current, which is also based in Boston, as an example of how GE plans to grow internally. Current already represents about $1 billion of GE’s $130 billion in annual revenue, and Immelt wants Current to grow to $5 billion by 2020.
Immelt also mentioned GE Aviation’s 50-year-old Hooksett, N.H., plant, explaining how the 700-person factory is becoming “fully digital” with new automated milling machines and 3-D printing capability.
More than half of GE’s 333,000 employees are associated with high-tech manufacturing now, Immelt wrote.
These shifts haven’t been without pain, though. GE announced plans in January to cut 6,500 jobs in Europe as it seeks synergies following the Alstom acquisition. And in Massachusetts, GE is eliminating 300 jobs at an Avon valve plant as it moves that work to a more modern facility in Florida.
Immelt didn’t mention those layoffs in his letter. But he repeatedly cited the company’s efforts to simplify its systems, to take out layers so the leaders are more in touch with the operations they oversee.
“Low-cost companies are better for your team and investors,” Immelt said. “It means fewer layers, fewer processes, more delegation of authority and better jobs.”