Folks,
For this week’s Energy and Capital story, I compare and contrast two of the biggest companies in America–GM and GE–and highlight how embracing the future is much more profitable than clinging to the past.

–C

A Tale of Two Charlies

2007-06-08

By Chris Nelder

“What’s good for the country is good for General Motors, and vice versa.”
–Charles Erwin Wilson, President of General Motors, 1941-1953

OK, so it doesn’t pack quite the same punch as the misquote “What’s good for General Motors is good for the country,” but I’m kind of a stickler for accuracy.

The oft-repeated misquote came from Wilson’s confirmation hearing before the Senate Armed Services Committee in January 1953, before he was approved as the Secretary of Defense under President Eisenhower. He had been asked if he could make a decision in his new role that was adverse to GM, since he still held $2.5 million worth of their stock at the time. He said “I cannot conceive of one because for years I thought that what was good for our country was good for General Motors, and vice versa.”

By the time he made that statement, GM had succeeded–with the help of other auto industry players–in destroying America’s streetcar system. And GM later spent decades and untold millions resisting every public attempt to control tailpipe emissions.

Yet, while the misquote was taken as a sign of GM’s arrogance and dominance at the time, it was also true in many ways. As head of GM during World War II, Wilson had overseen the most amazing transformation of plowshares into swords in history, and helped America win the war.

He was clearly an astute and prophetic businessman as well. In 1944, as the director of the War Production Board, he told the Army Ordinance Board that in order to prevent a return to the Great Depression, the United States needed “a permanent war economy.” This permanent war economy would evolve into the modern military-industrial complex.

Yes, the same military-industrial complex that the man who hired him, Eisenhower, would later famously warn us about.

Eisenhower had an abiding passion for road-building and automotive transport, and saw it as a key element of national defense. He even made rebuilding the nation’s network of roads an element of his presidential campaign.

So Charles Erwin Wilson was a natural ally for Eisenhower in that effort.

But there was another Charles E. Wilson who was also often in the press at the time: the former CEO of General Electric, who had served as head of the Office of Defense Mobilization under Eisenhower’s predecessor, President Truman.

To distinguish the two Charles E. Wilsons, the GM CEO was nicknamed “Engine Charlie” and the GE CEO was named “Electric Charlie.”

Fast-forward fifty-some-odd years.

Engine Charlie’s company is now the very emblem of what’s wrong with the country, just starting to pull out of the worst slump in its history, at war with its shareholders over emissions, lagging behind a market becoming increasingly concerned with fuel economy and emissions, losing market share every year, and desperately trying to turn itself around to refocus on the vehicles of the future.

And his legacy is an albatross around our collective necks: A nation of 210 million cars, desperately hooked on oil, with ever crowded roads, stressed out drivers, befouled air, a fuel supply in decline, an unsustainable topology of communities, and few good options for transition to something else.

Not to mention a permanent military industrial complex that eats half of the country’s budget every year . . . in large part, to protect the fuel supply for all those cars.

Electric Charlie, How Do You Do?

Meanwhile, Electric Charlie’s legacy is helping to lead the way to a future of renewable energy.

That’s because Jeffrey Immelt, GE’s current CEO, has been inspired by the concepts of the green revolution such as those discussed in Paul Hawken’s Natural Capitalism. He knows that the “triple bottom line”–profit, people, and planet–is the name of the game going forward.

Since launching his “ecoimagination” initiative two years ago, he has transformed one of the world’s largest and most successful corporations–indeed, one that still earns the wrath of environmentalists for some of its previous endeavors–into a powerhouse of renewable energy and energy saving devices.

“We’re at a tipping point where energy efficiency and emissions reduction also equal profitability,” he says.

It’s just that simple.

No wonder, then, that GE has had the pleasure of watching its sales of environmentally friendly products roughly double every two years.

According to GE, sales of environmentally friendly products, such as wind turbines, water-purification systems and energy-efficient appliances rose from $6 billion in 2004 to $12 billion in 2006, and it expects to sell $20 billion by 2010.

Now, green energy is still a relatively small part of the behemoth’s business, which raked in $163 billion last year.

But the green part of the business doubled in two years, while the rest of GE’s business grew only 20% over the same period.

The green energy group already has $50 billion worth of new projects in the pipeline.

That ain’t no chump change.

Immelt recently announced that he’s bumping up the share of the company’s $3.7 billion R&D budget devoted to green projects from $900 million today to $1.5 billion by the end of the decade.

And GE just introduced a prototype for its first diesel-electric hybrid locomotive–a bold move by North America’s largest maker of locomotives.

So, how’s that ecoimagination thing working for them?

Well, the profit picture is obviously excellent. We may presume that GE’s people–and stakeholders–are pleased to be part of the green enterprise. So what of the planet?

GE reduced its greenhouse gas emissions by four per cent in 2006, ahead of its target of lowering them by one per cent before 2012. Even as GM–along with its knuckle-dragging auto industry brethren–is pouring millions into a propaganda campaign to convince the public that they don’t want better fuel economy.

It takes vision to do what Immelt has done, vision and the courage to go your own way if that’s what it takes to embrace the future. He’s not waiting for Washington.

“I think the idea has traction now. As a business, you have got to be willing to have your own strategy [on climate change],” Mr Immelt told the Financial Times two weeks ago.

And he certainly has. He inherited an old, stodgy, highly industrial, low-growth business, and in a few short years has begun to reshape it into a world leader in the most profitable sector of the future: green energy and climate change mitigation.

Perhaps those in the driver’s seat of Engine Charlie’s business should take a few pointers from the man at the helm of Electric Charlie’s.

Because what’s good for GE is truly good for the country.

Until next time,

–Chris