Tag Archives: Jeffrey Immelt

General Electric’s F-136: Down but Not Out

Was I wrong. In a January post, I confidently stated that “newly elected House Republicans are not going to stop the F-136”. Yesterday they did, stripping funding for GE’s alternate propulsion system for the F-35 Joint Strike Fighter from HR1, the continuing resolution for 2011.

House Armed Services Committee member Tom Rooney, a Florida Republican, sponsored the amendment. 47 Republican freshmen bucked their party’s leadership – Boehner, Cantor, and House whip Kevin McCarthy — and voted with Rooney. This led Colin Clark, who blogs over at DoDBuzz, to see yesterday’s 233-198 vote as a victory for the Tea Party and other “other deficit conscious Republicans.” Clark cites an email from defense analyst Loren Thompson:

“This shows how election of Tea Party Republicans has changed the political calculus in Congress.”…“Proponents of the second engine argued it could save the government money by enabling competition, but members were more impressed by the up-front cost of funding a second production line and supply network.” It also “really puts [House] Speaker [John] Boehner on the spot, because he was a leading proponent of pork-barrel spending that would have benefited his district. He doesn’t look like he’s in tune with the dominant trend in his party.”

“Now we know just how much Congress has changed since the November elections,” writes Clark, who thinks the F-136 vote might represent “a tipping point” for the Defense Budget generally. But that’s a pretty big leap, and the notion that meaningful cost-cutting is really “the dominant trend” in the Republican party is open to debate.

After all, the F-136 was an easy target. Secretary Gates didn’t want it; the Air Force didn’t want it; the President didn’t want it. It was egregious example, a symbol of the excesses of the Military Industrial Complex. Rooney brags that over the long term this single cut will save taxpayers “over $3 billion,” but more immediately it cuts $450 million – a fairly insignificant number in the world of DoD appropriations. Indeed, if HR1 marks a tipping point, it is most likely in other areas, such as transportation, education, funding for the arts and domestic programs.

It’s also unlikely that the vote on the F-136 will go the same way in the Senate. (Here I go, making another prediction.) GE will continue to “press the case for competition,” a spokesperson said. That probably will mean some negotiating behind closed doors for Jeffrey Immelt, whose appointment last month to lead the President’s Council on Jobs and Competitiveness marked the crowning achievement of a $39.3 million dollar GE 2010 lobbying campaign, $9 million of which was spent on lobbying for the F-136. Mr. Immelt would be remiss if he did not take this opportunity to champion competition.

A Connecticut Lobbyist In Obama’s Court

There has been plenty of griping and grumbling over the past twenty-four hours about the President’s appointment of General Electric CEO Jeffrey Immelt to lead the President’s Council on Jobs and Competitiveness. While he may be an idol of corporate America, Immelt appears to be an unlikely champion of American job creation. “Since Immelt took over in 2001,” Shahien Nasiripour reports in an article on Huffington Post,

GE has shed 34,000 jobs in the U.S., according to its most recent annual filing with the Securities and Exchange Commission. But it’s added 25,000 jobs overseas.
At the end of 2009, GE employed 36,000 more people abroad than it did in the U.S. In 2000, it was nearly the opposite.

To make matters worse, Connecticut-based GE has not exactly been focusing its investments on American innovation and growth: in 2008 and 2009, Nasiripour points out, GE decided “indefinitely” to invest earnings abroad, while booking losses at home: as a result, General Electric enjoyed a negative tax rate in 2009 and a low rate of around 5 percent in 2008.

It stands to reason that more inducements and allurements, in the form of corporate tax breaks, are in the works to help focus Immelt and other corporate leaders on job creation. To help bring some of those foreign investments home, Immelt and other corporate titans will most likely continue to push for making the Research and Development Tax Credit permanent. They give the impression they are holding the spirit of Thomas Edison hostage, and will only release him if their conditions are met.

You might be forgiven for asking whether this is really the best way to spur American innovation, or whether Jeffrey Immelt and GE really have America’s best interests at heart. I’m sure Immelt believes he does; but can he, really? Maybe it all depends on how you sweeten the deal. Immelt himself reassured analysts and investors yesterday that he will always put GE first: “My commitment to GE and my leadership at GE, that doesn’t change,” he said on a conference call. He knows, I suppose, that no man can serve two masters.

The disturbing truth is that there really isn’t any great conflict of interest here: GE’s interests are not so far from American lawmakers’ interests. This happy consensus is largely the result of GE’s lobbying campaign, which in 2010 amounted to $39.3 million. $9 million of that campaign was dedicated to lobbying around a single project: the F-136 propulsion engine.

Developed for the Lockheed Martin F-35 Joint Strike Fighter jet (a big $382 billion project), the F136 propulsion system is GE’s “alternative” to the F-135 propulsion system developed by Pratt & Whitney. An alternative. That is, there are no plans to use GE’s F-136 engine in the fighter jets. Pratt & Whitney won the government contract for the F-35’s propulsion system. You’d think that would have resolved the matter.

But these things have a momentum all their own. Funding for the F-136 started as an earmark in a defense bill, and grew. The Bush administration tried to kill the F-136 engine; Secretary Gates called it a “boondoggle,” and President Obama promised to veto any defense bill that included the GE engine. Robert Gibbs yesterday reiterated that the engine is “not something we need.” But GE, arguing that competition drives down costs, has lobbied and continues to lobby for its engine, running ads, working both sides of the aisle, and spreading its message through the press.

Newly elected House Republicans are not going to stop the F-136. Congress has already funded its development to the tune of $3 billion, and funding will continue unabated through March 4th of this year. And just yesterday, a GE spokesman told ABC Newsthat “newly elevated leaders are even more likely to keep the engine program afloat.” It remains to be seen whether, come March, the President can or will stand his ground.

Can America Still Bring Good Things to Life?

When announcing the appointment of General Electric’s Jeffrey Immelt to lead the President’s Council on Jobs and Competitiveness today, President Obama vowed to put “our economy into overdrive.” He meant what everybody took him to mean: we are now going to get things really going, shift America into high gear, pull out all the stops, discover our inner Edison, “build stuff and invent stuff,” and export it to the world.

But the word “overdrive” is probably not the word the President should have chosen. Or at least it commits him to positions he isn’t going to take – positions I wish he would take.

Indulge me for a moment. Overdrive is not just high gear. Overdrive also means better fuel economy. When you put your car into overdrive you get the best mileage per gallon, because the overdrive mechanism allows “cars to drive at freeway speed while the engine speed stays nice and slow.” Or, as the entry on Wikipedia puts it, overdrive “allows an automobile to cruise at sustained speed with reduced engine speed, leading to better fuel consumption, lower noise and lower wear.”

At the very heart of the President’s metaphor, then, are two ideas: one, economy, a more efficient or economical use of resources (or fuel) and two, sustainability, maintaining a constant speed without causing wear and tear. Right now, we are desperately in need of both: new ways of conserving the resources we have and a more sustainable way forward than the cycle of boom and bust, or dangerous exuberance followed by social collapse.

Those ideas were not on display today in Schenectady. There was some talk about clean energy – a business GE is in, and where, not surprisingly, Immelt thinks a “partnership” between the private and public sector is “essential.” But the main focus was on U.S. manufacturing and U.S. exports, which the President wants to double over the next five years. “For America to compete around the world, we need to export more goods around the world,” said the President. So we need to innovate and invent new “stuff,” or bring good things to life, as the people at GE used to say. “Inventors and dreamers and builders and creators,” we need to expand our manufacturing base and bring American products to the global marketplace.

Reading these remarks, I can almost hear the old General Electric jingle. “We still have that spirit of innovation,” Immelt said. “America is still home to the most creative and innovative businesses in the world,” said the President. We are “still” innovative, both leaders took care to say — almost as if we no longer believe it or doubt it’s true. We’ve still got it. Our force is not spent.

It’s great to be reassured of our continued prowess. There are, however, lots of unexamined assumptions at work here, and chief among these is one I’ve discussed in earlier posts: namely, the assumption that “innovation” is the surest path to “growth,” and that growth – even unsustainable growth – is good in and of itself.

Sustainability doesn’t really enter into this conversation – partly because, I suppose, it really isn’t a conversation. It’s all bluster and boosterism.

Nor would anyone at these events, the President least of all, take a step back and ask whether, while we are doubling our exports, we should also take some steps toward greater self-sufficiency. Doing that, especially when it comes to energy — and energy consumption — would leave us less exposed.

I’m not even convinced doubling our exports or even saying we are going to double our exports is the right thing — for the dollar, for trade agreements we have in place, for the very focus of American industry and innovation. For his part, Immelt has no doubts:

“It’s the right aspiration,” Immelt said of the president’s goal of doubling American exports to more than $2 trillion in five years, during a Nov. 6 interview in Mumbai, where he joined Obama for a meeting with business leaders. “We’ve done it in the last five years as a company.”

Maybe in the long run, or at least in five year’s time, what’s good for General Electric will turn out to be good for the republic. How could it be otherwise?