When a CEO has a major foot in mouth episode, it’s usually the result of uncontrolled candor. And today’s outburst by GE CEO Jeffrey Immelt appears to be true to form.
According to the Financial Times, the GE cheiftan said some less that politic things about China and Obama at a private gathering which his operatives tried to characterize as being taken out of context. Yeah, right. His commentary so typifies what you’d expect from the top executive of a large multinational (and major financial firm to boot) that it’s hard to see his remarks as anything other than a reflection of his views. They happen to be ugly because they represent American corporate arrogance writ large.
From the Financial Times:
Jeffrey Immelt, General Electric’s chief executive, has launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals…
“I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.”
Yves here. This is almost comical. A US corporate executive thought the Chinese officialdom was supportive of their business goals? China is out for China, period, and that is a stance that that the US would be well advised to emulate, rather than being brainwashed (or bribed) into thinking that the interests of large multinational are aligned with national goals.
I may sound like a complete Luddite, but I have LONG questioned the wisdom of foreign firms locating factories in China and exposing themselves to the risk of piracy, counterfeiting, and other forms of technology transfer. This is an authoritarian country where organs are harvested from prisoners who are still alive. Given how brutal they are to their own citizens in the name of preserving state authority and perceived national interests, the only reason for them to play nice with foreign companies is if they think the arrangement benefits them, not because they give a rat’s ass about their health. It would not be impossible for them to seize assets (with trumped up charges) but Chinese businessmen are sufficiently skilled at stacking the deck to suit their interests that such crude measures are unlikely ever to prove necessary.
Consider this commentary in the Asia Times, in a review of Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production:
Chinese manufacturers cut corners wherever they can, from product quality to factory equipment and maintenance. They unilaterally change product and packaging specifications to trim costs. They raise prices after the deal is signed, leaving the importer to absorb the added cost. They reproduce their customers’ products for sale at higher margins in other markets. With support from government, bankers, and networks of fellow manufacturers, they conduct manufacturing and customer relations as a game, treating the other party as a patsy not a partner, playing for the short term of making an extra penny at the risk of product quality but also taking a long-term, multidimensional outlook that outflanks the hapless customer….
For Chinese manufacturers, a deal with an importer can be desirable even if it doesn’t appear profitable. Reasons range from domestic counterfeiting opportunities to status to customer contacts (for disintermediation – cutting out the importer to deal direct with retailers) – to cash flow or capital (secured by an enlarged plant) for other investments. While most small importers are playing checkers, focusing on profit on each contract, Chinese manufacturers are playing chess – and playing to win – Midler says.
Yves here. Now this extract describes the situation facing firms contracting in China, not major manufacturers like GE setting up operations in the country. But step back a second and look at the ruthlessness of the tactics, the routine cheating and the willingness to sacrifice short term profits for the long game. Immelt and his ilk, no doubt seduced by too many meeting and dinners with government officials who told him what he wanted to hear, was unwilling to to consider that a big globe spanning company could be played like a rube, used when he was valuable and squeezed when he had served his purpose. After all, isn’t that how almost all Big Co’s behave? But they act so wounded when the table are turned on them.
Immelt’s diatribe on Obama verges on childish:
Mr Immelt also had harsh words for Barack Obama, US president, lamenting what he called a “terrible” national mood and expressing concern that over-regulation in response to the global financial crisis would damp a “tepid” US economic recovery. Business did not like the US president, and the president did not like business, he said, making a point of praising Angela Merkel, Germany’s chancellor, for her defence of German industry.
Yves here. This tactic by big business, to howl over trivial, cosmetic reregulation as if it were rape, illustrates how they believe they should be in the driver’s seat and government and the public at large should fall into line. Look at his distorted logic: the recovery is going to be “tepid” (actually, we should be so lucky as to have it be as warm as “tepid”) and the national outlook is sour because we are still working through the aftereffects of a massive credit bubble, with GE profiting handsomely from helping to create this disaster. But no, let’s airbrush out the real cause, the utter recklessness of financial services firms around the world, and shift blame to Obama.
And who cares if Big Business likes Obama? I dimly recall that the major corporate interests of their day hated Teddy Roosevelt and FDR, both now considered to have been fine leaders, and were quite fond of Calvin Coolidge and Herbert Hoover, both of whom rate among the ten worst presidents. So being popular with businesses may well be a negative performance indicator.
It would be nice to see Immelt’s pique as a sign that major companies are finally being called to heel by governments, but the indignities GE has suffered are too minor to warrant such a hopeful conclusion. His reaction is reminiscent of a spoiled toddler who has had a few toys removed from his well stocked playpen.