Elborne Identity

Since its arrival in the UK in the 1930s, GE, the more common name for General Electric, has invested a big stake in British manufacturing. A series of acquisitions and its strategy to operate in sectors with strong, stable demand globally has fuelled GE UK’s growth.

From 2000 to 2008, GE UK revenues multiplied from £900m to £4bn. The company has performed solidly through the last two years, more or less retaining its UK headcount – the firm’s largest outside the US – throughout the recession. The sectors it operates in are robust and, with the exception of financial services, comparatively resilient to recession. GE has five subsidiaries: GE Energy, GE Technology & Industry, GE Capital, NBC Universal and GE Home & Business Solutions, the first four of which have a UK footprint.

Mark Elborne took the reins as president and CEO, GE UK, in April 2009, arriving from Brussels where he was vice president and General Counsel, Europe and European Regulatory Affairs, GE International.

Elborne, an alumnus of Exeter University and The College of Law in London, spent 24 years at an international law firm, 16 years as partner. He joined GE in 2004, working for GE Insurance Solutions in Kansas City. As a lawyer, manufacturing production systems and ‘just-in-time’ processes are not his forté.

Specialising first as a litigator, however, his career has exposed him to the blood and guts of some big companies, both their inner mechanics and how to fix complex problems. “I was involved in some large, complex cases which meant sorting out very big messes – that gives you advantages,” he says. “You learn about the underlying nature of the business in question, as well as how businesses get bought and sold, the financial dynamics of a company, and you’re always involved in the law of regulation.” A cool customer with a very wide view of the business world, Elborne has always had a strategic approach to his work. The skills needed to forecast the outcomes of legal disputes translate well into corporate management, he says. “What you learn is that business is organic and dynamic and never stops; it’s not birth, marriage and death. When you take that [legal training] into the role of General Counsel of a GE business, which is very strategic, I have not found it difficult to transition into the role of CEO. The job involves many disciplines; a legal background helps, it makes you inquisitive, you want to understand concepts, ideas, operations and procedures.”

Outside the US, GE’s biggest footprint is the UK. Why?
“Since 2000, we’ve built-out our existing businesses and broadened our industrial, financial and media businesses and certain industries have gravitated to the UK and London – for example, NBC International is headquartered in London.

CNBC is here and GE Capital has its HQ here. Also we’ve made many acquisitions – we bought Smiths, Amersham, Whatman; about 12 names in different sectors, public and private. We’ve found that UK technology companies have had a lot to offer and have been complementary to our growth strategies.”

Where is GE focusing its resources?
“Infrastructure and finance. We are reducing our ownership of NBC Universal to 49% subject to regulatory clearance. The target is infrastructure, Aviation, Healthcare, Energy, Oil and Gas, Transportation, Home & Business Solutions – which includes the appliance business in US and industrial software – and Water. Where are the key investments going to be in the foreseeable future across the world, where is the need for the most investment?”

How do you assess the strength of the UK manufacturing sector?
The ‘magic sauce’ is in both the IP of the product, and the knowhow of the people. We have many businesses here because is this is where good businesses have grown. You buy a company that has developed a product, they’ve lived with it, developed it, grown it and they understand it. As a country, we have to continue to invest in making sure that we are creating manufactured value-added products. Therefore we have to invest in the education, training and incubation of the next generation of people who are going to grow these businesses.

Aviation
Elborne mentions GE’s Aircraft Engine Servicing facility in Nantgawr, Wales. “The apprenticeship scheme is up to five years. Young men and women are being trained on highly skilled engineering where they strip down, refurbish and rebuild engines that cannot perform unless they have a 99.9999 recurring reliability. You must continue to bring those people in; if you don’t have that continuity the brains that came with the acquisition or the business you’ve brought into GE will be lost.” At present, GE’s Nantgawr site is the only aircraft engine servicing facility in the world catering for the Airbus A380’s Engine Alliance GP7200 engine, one of just two engine types airlines can select to use on the superjumbo. Big orders for the A380 placed at the Farnborough International Airshow gave Nantgawr a fillip, but the gain is long game – the engines don’t arrive for regular overhauls until they have been in service for a few years. But it emphasises this site’s competitive advantage and long term security. Including its joint venture engine with Snecma (Safran), GE announced total sales of $16bn at Farnborough, twice the order book at Paris the previous year and four times that at Farnborough in 2008.

Long termism retains staff
A factory at Arle Court in Gloucestershire was closed in 2008, with the loss of 110 jobs. But overall the company’s manufacturing headcount has remained level through the recession. “We have not had to take radical action. In fact, there are several UK sites where we have increased hiring because we have kept production here rather than moving to lower cost places.” This reflects the nature of its main products.

“These are long cycle businesses and large order books involved in global supply chains, so you have a very broad base,” says Elborne. “In our infrastructure sector, for all the difficulties that Western economies have had, there’s still been fairly robust growth in Brazil, China and India. And there’s a whole new generation of technology required, especially in the energy space to reduce carbon emissions, greater energy efficiency, carbon capture and storage, open rotor technologies, et cetera.

We have to continue to invest beyond the short term cycle, so we are in a position to have the best technology going forward.”

Why have some production facilities been retained in the UK and not offshored?
“The transportability of technology and process, where the market is developing – there are a range of reasons. We tend to co-locate around an area that becomes a global centre of excellence for a product, and there are 15 of these in the UK. In our oil and gas business we bought a UK company called Sondex that makes technology installed inthe drill head that receives material and directs the drill. Its site in Farnborough is now the global centre of excellence for that technology. GE brings in (i) the investment to create a product better (ii) the customers to see it and (iii) our employees from other parts of the world to drive growth, expansion and sales.”

Further investment:
“Bristol will become the global centre for our subsea controls business, because that’s where the product development will take place. The investment for hyperbaric chamber has been committed to and is now being put in place.

“We are building new oil and gas facilities in Montrose. Sure, there’s a lot of pressure because of the state of the economy but we’ve continued to make those investments in industrial infrastructure for manufacturing right through the dip, which is consistent with taking a long term view.”

En Gen
“This is the only country in the world outside the US which has a Smartgrid demonstration centre,” says Elborne. “Smartgrid balances supply and demand and optimises the grid so that overall it requires less base load generation, leading to a reduction in the number of power stations. Nuclear is long way away. A lot of renewables are coming on board and investment is needed to enable UK lights to stay on and support demand. We invested in a battery company and we’re building batteries essential to next generation energy storage. We have the technology that operates about 90 per cent of the grid that will be key to working out how you distribute that energy. We’re investing heavily in solar in what we think will make a difference to energy generation.”

Earlier this year GE announced that it would build offshore wind turbines in the UK. Wind has always been a big resource in the UK; what made GE announce a manufacturing plant here this year? “The development of the round 2 and 3 offshore wind farm leasing and the future growth is a driver,” says Elborne. “Clearly the support provided by the last government in their Budget is crucial in helping the UK to be competitive against other places where you could build a manufacturing site to support the wind industry.” The Budget announced a competition where port developers with manufacturers could apply for funding to help develop port infrastructure, enabling the manufacturing and the deployment to take place. Would he be surprised if they cancelled it in the Spending Review? “I would be disappointed, but I think everything is on the table,” he says.

“We are anxious of there being the support for infrastructure; it’s for the people who own the sites to make sure they are upgraded. I’m told the generators on these turbines weigh 100 tonnes, the blades will be up to 100m. You need deep water, long quay walls, good access – the UK has not invested heavily over a long period since we privatised the ports. In Europe, many ports are owned by the state or principalities, and everybody in Europe is anxious to get hold of manufacturing.”

Witness the fitness
GE Healthcare’s global HQ is near Amersham, Herts, and GE bought medical diagnostics firm Amersham in 2003. Its core product is contrast agents, as opposed to hardware, which are used in procedures to highlight body organs. “The product is a critical component to the development of treating degenerative problems like Alzheimer’s disease,” says Elborne. “GE was better known as an equipment manufacturer, and that [Amersham] gave us a real link into the biosciences. We’ve invested in the UK, including buying filter-maker Whatman two years ago, to broaden the technology offering across healthcare.” He says the developing world is a key driver for this business. “If you’re going to drive healthcare in the developing world you need to produce effective technology that they can afford. We’ve been quite successful in what our chairman calls reverse innovation: taking a product that was previously designed for and replicated for use across developed markets, scale it down and ensure it is responsive to the needs of a country with less money and other challenges.” An interesting example of reverse innovation is the Vscan, a small ultrasound scanner designed to help diagnose complications in the first trimester of pregnancy. “In India, for example, the nearest clinic could be three days away and then there’s a queue round the block. Instead, a doctor goes to the village and can diagnose the condition’s severity on the spot. Now what does every GP want? Ultrasound that they can carry in their bag.” GE is a sponsor of the London 2012 Olympics.

GE Jenbacher co-generation technology has been selected to power two natural gas energy centres being built at the Olympic Park and Stratford City development. “We’re providing the polyclinic for the athletes and we’ve also extended our sponsorship to the UK triathlon team, developing techniques that can help measure various body recovery parameters, blood density, bone density – so that they can train right to the edge before it gets dangerous.”

Which GE UK businesses should we look out for in next 12 months?
“Watch the recovery, and the development of the technology manufacturing and research we do here. We’ve created a P&L around cities, connected to our ecomagination strategy, so watch how we begin to deploy cutting-edge solutions to some urban challenges. How do you address the great challenge of energy efficiency in buildings? How do you make hospitals more energy-efficient, how do they reduce their opex? The plan is to look for new concepts and trials right across the board where the goal is driving efficiency, green, and saving money. It’s new ways to do old things.” “Innovation is as much about new ideas as products. Therefore it’s about making the UK a place where you can demonstrate something that becomes an exportable idea. Yes there are some projects we’re looking at where if we can pull them together they will be accretive to the UK manufacturing base.”