GE Exec.: Outsourcing Doesn't Mean Lost US Jobs

Robert Siegel talks with John Rice, vice chairman of General Electric and president and CEO of GE Global Growth and Operations. Rice is in Washington for part of his company's four-day summit — "American Competitiveness: What Works."

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ROBERT SIEGEL, HOST:

While President Obama was in Wisconsin, some of corporate America's top leaders were in Washington today talking about much the same thing - how to breathe new life into American manufacturing while competing in the global marketplace. They've gathered for a four-day conference called, "American Competitiveness: What Works."

And we're going to hear now about what works and what doesn't work from one of the nation's largest and oldest companies, General Electric. John Rice is vice chairman of GE and president and CEO of its Global Growth and Operations. He's based in Hong Kong and he's taken a break from the conference to join me now in the studio. Welcome to the program.

JOHN RICE: Thank you very much.

SIEGEL: The conventional wisdom is that when you sell goods in China, where you're based, U.S.-based companies may generate some engineering and design jobs back here in the U.S., but the real manufacturing job growth is going to be in China, for the Chinese. Is that fair enough?

RICE: No. You know, we have probably 30,000 jobs in the United States, manufacturing jobs that exist because we sell jet engines and locomotives and gas turbines in places like China. And so, we do create engineering jobs because of the work we do there, but we also create very traditional manufacturing jobs right here in the United States.

SIEGEL: While at the same time, creating manufacturing jobs for Chinese workers as well?

RICE: Absolutely. And I think that's really an important point because too many people in the United States and other places think that job creation is a zero-sum game. By creating a job in China, you're creating one less job in the United States. And the fact of the matter is, it doesn't work like that. We have more jobs in Greenville, South Carolina, more jobs in Erie, Pennsylvania, more jobs in Evandale, Ohio, because of work we do in China, not fewer.

SIEGEL: Is it a fair observation that when the same job could be done either here or in China, the difference in wages or perhaps the difference in favorable infrastructure, regulation or taxes dictates that job is actually better for GE to put in China than to put in the U.S.

RICE: Not always. I'll move away from China for a second but to Mexico. We are in process of bringing some jobs from Mexico to places like Decatur, Alabama and Louisville, Kentucky, where we will pay a substantially higher wage than we were paying in Mexico. But we can do it, because workers are productive, efficient, and able to find other ways to reduce costs.

SIEGEL: Are you bringing jobs back from Mexico because of political and the violent situation in Mexico?

RICE: No.

SIEGEL: No?

RICE: No. No. No. We still have lots of activities that we're proud of in Mexico. We have a good team of people there, and there's plenty of things that we're happy to be doing in Mexico. But my point is really about wage rates. You know, low-cost labor is not the single factor for why you do things in places, because they - wage rates change over time.

When you have productive teams that get up every day thinking about how to do things better, faster, more efficiently, you can offset the impact of whatever wage you're paying in whatever country you're paying it.

SIEGEL: I want to ask you about another issue that - well, this pertains once again to China. GE has a big deal with a big Chinese aviation company. It's a 50/50 partnership. And other companies say that if you get involved in a deal like that with the Chinese, first you share technology. But before long, you're competing against the Chinese company - Siemens has this happened to them - you're competing against the Chinese company that has technology that they gained from you in the partnership. What guarantees do you have that your intellectual property rights will be respected in China?

RICE: We don't have that guarantee anywhere. But we see things getting better in China, and we have to take a long-term view. So this 50/50 JV that you referenced is very important for us...

SIEGEL: Joint venture that would mean?

RICE: Yes. It's very important for a strategically in our avionics business, and it's a perfect example of where we will create hundreds of engineering jobs in the United States that wouldn't have existed and jobs in China that wouldn't have existed, in order to do this. And the alternative for us is to be, you know, the fourth largest competitor in that segment of the industry with no real prospect for moving up the list.

SIEGEL: As a GE executive, very senior executive based in Hong Kong, do you feel that you're witnessing the country that is going to be dominant economic power, if not more generally the dominant power of 21st-century? Being in China, do you have any sense of inevitable American decline or you're shaking your head as I'm putting this question.

RICE: Quite contrary. Certainly, I think we're looking at the country that will have largest economy. But that's very different than the point you are making. There doesn't have to be anything dominant about it. They understand that job creation in the U.S. is important to them, too. What happens in world if U.S. economy doesn't work well? It's not good for anybody. This world from an environmental perspective, financial is very interrelated.

SIEGEL: Well, Mr. Rice, thank you very much...

RICE: Thanks.

SIEGEL: ...for talking with us today. John Rice, vice chairman of GE and president and CEO of its Global Growth and Operations.

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