More than a billion people were watching late last year when the first commercial airliner ever built by a Chinese firm rolled off the assembly line in Shanghai. China's state network, CCTV, broadcast it live, a proud symbol of the country's rising technical prowess. Yet if you looked closely, there was another peacock preening. Of the 19 suppliers that collaborated on the 90-passenger regional jet, only one had its logo on the plane: General Electric, which built the engine. No surprise, perhaps, thatsubsidiary CNBC was the only foreign network permitted to cover the event.
There is no company on the globe that's better at leveraging the multiple parts of its business to feed growth than GE. And there is no better vehicle for illustrating this corporate strategy than the company's aviation activities in China. "Every aircraft, every engine, every building we help build in a market like China, we view as a GE marketing tool," company chairman and CEO Jeff Immelt told Fast Company.
Immelt and other top GE strategists love to talk about the opportunities presented by "white spaces" and "adjacencies" — corporate-speak for untapped markets that the company wants to develop, and for expansion opportunities that one GE business unit can pass along to another. Steve Bertamini, who oversees all of GE's operations in China, can point to both in his realm — and he's not referring just to GE's sponsorship of the 2008 Olympics. "The Chinese are beginning to shift growth out of the major metropolitan cities like Shanghai and Beijing and move into tier-two cities," he explains from his office in GE's 150,000-square-foot R&D center in Shanghai. He notes that China has 120 to 150 cities with populations of more than 1 million, compared with 9 in the United States and 36 in Europe. "We figure in this next five-year period, the Chinese government is going to spend $2 trillion on infrastructure projects. We think there's probably a good chunk of that, let's say at least half, that has some GE opportunity. I just got back from Inner Mongolia yesterday, and there are probably $2 billion worth of projects for us to take a look at. And I've only got five people on the ground there."
Aviation and jet engines aren't the only way GE will try to tap this market, but they are a key: China is slated to open more than 40 new airports by 2010 — at the end of 2006, the country had 147 — and another 55 or so by 2020. The country's evolving airport geography is like a treasure map that pinpoints where the government is going to make massive investments. "Every time I go to China to visit our customers," says Scott Donnelly, CEO of GE Aviation, "all they want is more aircraft." GE's aviation business is already booming in China, with back orders of more than $5 billion for engines and lucrative service agreements. Four of the country's five major air carriers have signed on to purchase 84 GE engines — worth $1 billion — for their new fleets of Boeing 787 Dreamliners. And there are 173 orders for the Chinese-built regional jet, powered by GE engines, that was launched with such fanfare in Shanghai.
Yet that business is only the tip of what GE hopes to glean from China's second-tier-city investment. Unlike its aero-engine competitors Rolls-Royce and Pratt & Whitney, GE is a conglomerate that can exploit all the market opportunities its aviation experts discover in a countrywide airport plan. In other words, the adjacencies are the billions in power grid, water, and rail projects that inevitably accompany urban modernization. And the best way to understand how the company plans to leverage its way into those dollars is to visit another second-tier city, here in America. You need to go to Cincinnati.
"Building a commercial jet was China's dream, and it was decades in the making," says Amy Zhang, a marketing manager for GE's aviation unit. She is sitting in a conference room in a nondescript office park in the Cincinnati suburbs. It is one of several GE locations in the area. At the company's aviation headquarters, in nearby Evendale, where aviation unit CEO Donnelly works and where the company's classified military engines are designed, visitors must show proof of citizenship and relinquish their camera phones before entering. But here among the nose-high cubicles, security is light.
Zhang, a 10-year GE veteran, was born in China and attended the Beijing University of Aeronautics and Astronautics, where many of China's top aviation officials were trained. She was on hand in Shanghai when the regional jet came off the assembly line. She had a good deal to do with it — the president of the jet maker, China Aviation Industry Corporation I, known as AVIC I, refers to her as the plane's "ambassador" — and she is directly involved with marketing and selling the aircraft to regional carriers in China. Her mom watched the rollout from her home in Jingde county in Anhui province. Zhang became a U.S. citizen in 1998 (she still speaks with a slight accent), but she has no trouble rejoicing over China's airline advancement. "This photo is really a symbol of everything coming together," she says, holding up a picture of herself on the rain-soaked tarmac in Shanghai with a vice president of AVIC I. "China wants to be high tech," she says, alluding to the country's plans to produce a large-scale commercial jet to compete against Boeing and Airbus. Zhang, of course, hopes to have GE engines powering the planes: "We have very strong relationships with the key people."
"In the aviation business, you don't just sell an engine and say, 'Thank you very much,' and you're gone," Donnelly explains. "Selling an engine as part of an airplane deal is the beginning of 20 to 25 years of servicing that engine. It's not a transaction but an ongoing relationship." That's one reason aviation is such a powerful potential wedge into a white space like China.
"You don't just sell an engine and say, 'Thank you very much,' and you're gone," says GE Aviation CEO Scott Donnelly. "It's not a transaction but an ongoing relationship."
These aviation relationships also allow GE to extend its reach into other areas. "I get a lot of doors opened up because of GE and what we bring," says Mike Wilking, president of aviation for China and Zhang's sales partner on the ground. Wilking — ironically, a Cincinnati native based in Shanghai — has been deputized by GE China chief Bertamini to act as a brand representative across GE's business units, from aviation to water to power — to make real that elusive theoretical model known as synergy.
For example, Wilking is now responsible for contacts in the western province of Sichuan, with 87 million people (nearly three times the population of Canada). The capital is Chengdu. "I'm developing strong relationships with the mayor of Chengdu and with the party secretary of the province," says Wilking. Aviation is his key lever. In a joint venture with flagship carrier Air China, GE is building an aviation maintenance and repair center in Sichuan. Wilking sees it as the straw that stirs an even bigger drink. "I'm not just talking about aviation. I'm there representing GE," he explains. The maintenance center "will lead to a tremendous amount of sales opportunity," he says. "I'm not going to sell them wind. I'm not going to sell them water — that's not my expertise. But I'm going to bring the GE teams that are expert in those areas, and I'm going to make sure we do it in a coordinated fashion. It's like, 'You don't have that experience today, Mr. Party Secretary, nor do you have the infrastructure to pull it off. I do. I can bring it. I can deliver it.' "
"I'm not going to sell them water — that's not my expertise," says GE Aviation's man in china, mike wilking. "But I'm going to bring in the GE teams that are expert."
This strategy is not confined to the aviation division. It flows throughout GE like corporate feng shui. Bertamini points out that GE has sold more than 700 turbines — wind, gas, steam, and hydro — plus 378 locomotives to China and has played a significant role in completing the country's west-east oil and gas pipelines. "That's helped us not only build credibility" — and $5.5 billion in revenue last year — "but also develop some very good relationships with the government, which as you might imagine is actively involved in many of these projects."
The relationship building in aviation actually cycles between China and Ohio. At the Technical Education Center in suburban Cincinnati, Michael Brown trains jet-engine mechanics for Chinese customers — more and more of them every year. Paul Lutmer, who manages the Learning Centre at GE Aviation headquarters, teaches Chinese airline executives GE's business principles. A few years back, Lutmer says, the Chinese would arrive dressed in black from head to toe. Today, he says, they wear Western clothes and seem more open to learning about Western culture.
Perhaps GE's most important cultural exchange in the United States occurs at its famous Crotonville leadership center in Ossining, New York. Every year, GE nominates 40 senior executives from various industries in China — subject to the approval of China's Central Organizational Department — to attend one- to three-week sessions. "These are the senior-most people who determine who is going to run which state-owned enterprise, who's going to run the province, who's going to be mayor of the city," says Bertamini. These sessions give GE the opportunity to build close relationships with key decision makers in areas that play to the company's portfolio. For example, in 2003, GE invited 22 executives from Baosteel, the sixth largest steel producer in the world. In the following years, GE built a combined cycle power plant and a water reuse facility and sold lighting and power distribution to Baosteel.
There's one final leverage point that GE uses to propel its aviation business and infrastructure products in China: the political pressure on China to buy more American-made goods. Two years ago, GE inked a memorandum of understanding with China's Ministry of Foreign Commerce to cooperate in increasing trade flow between the United States and China. "Many of our projects are big-ticket items," Bertamini says, "which is important when you have such a big [trade] deficit."
As CEO Immelt argues, "We are seeing our exports to China helping the U.S. economy." And, of course, helping advance GE's future.
A version of this article appeared in the May 2008 issue of Fast Company magazine.