May 10, 2006
Nani Beccalli

Ipek Cem recently met with GE International's President and CEO Ferdinando 'Nani' Beccalli-Falco in his Brussels office. Siting the importance of growth markets such as India, China, Turkey and the Gulf, Mr. Beccalli stressed GE's focus on these areas. Mr. Beccalli also talked about GE's 'company to country' strategy in these markets as well as such issues as their recent investment in Garanti Bank of Turkey, 'ecomagination' efforts at GE, and their sponsorship of the Olympic Games.

Ipek Cem: Our guest tonight is Nani Beccalli who is the President and CEO of GE International. Welcome to the show.

 

Nani Beccalli: Thank you.

 

Ipek Cem: We’re sitting here in Brussels in your office and in our periphery we have a lot of EU buildings. What is the significance of our international offices being so close to the EU?

 

Nani Beccalli: The EU is becoming a very important relationship for a company like GE. This office, this headquarter used to be in London, which is also a very important place, because it is from the European point of view the centre of financial activities. But then we had the mishap of the events with the acquisition of Honeywell, which as you know very well, didn’t go the way that we would have liked. And so we understood that there was the need for doing a little bit more with Brussels, a little bit more with the European leadership, and that’s the reason why we decided to move the office down. I have to tell you that that was the original reason why we did it. Now it happens to be a very comfortable location to have a European headquarter because, to have, excuse me, have a global headquarter because I start in the morning calling Asia, and I end up in the afternoon calling Latin America and Canada, without having to do anything of teleconferences in the middle of the night, or kind of funny things of that kind. And so it is a very good place to be.

 

Ipek Cem: Yes, and within the context of the EU, we know that you’ve been present in Turkey since 1948, when the first light bulb company was established during the time of Vehbi Koç, with the Koç Group, and then you have about 800 employees, and most recently, in 2005, you did a 25 per cent acquisition of Garanti Bank, which was all over the press. I would like to get your views about Turkey as a convergence country.

 

Nani Beccalli: I started in this job at the end of 2001. Before I was in the United States running businesses, and of course, when I started here, my first attempt was the one of looking at the important areas in the world that can offer a growth potential for our company. And of course you have China, you have India, and these kinds of areas, which are extremely important for the company, but within the European, Middle East, and African context, it was clear that our presence in Turkey was not a very strong presence. We had a long lasting presence, but it was not a strong presence. So I started studying Turkey a little bit more. What can I say about Turkey? It’s a big country. It’s seventy plus million people. It is a country, which is the hinge between the European World, and the Middle Eastern World. It is a country, which is young. It is growing. And so in my mind, it is very good to have good presence, and good relationship within the Turkish context. Again I like to focus the attention on the fact that it is the hinge between the European environment, and the Middle Eastern environment.

 

Ipek Cem: So I know that you, in some of your recent interviews I have read, you are mentioning the growth potential in China, the growth potential in India, and also the growth potential in the Gulf, in the Middle East. What kind of activities are you focusing on in the Middle East? Because on the one hand it seems like a very promising market, on the other hand it’s tainted by instabilities, tainted by the situation in Iraq, and the impact of that all over the Middle East. What are your thoughts on that matter?

 

Nani Beccalli: The Middle East is a place where because of the influx of money created by the oil price – I don’t know what it is… today seventy five dollars a barrel…with a tremendous positive cash flow that they have, they have the possibility to invest in building the infrastructure. The economies of the Middle East, and I’m talking about the Arabian peninsula as the prominent case, the economy has always been oil based. Now of course the attempt of the leadership, today’s leadership, in the Arabian peninsula, is the one of creating a diversified economy, investing in industries, for example chemical industry, metallurgical industry, and so on, in order to create a more complete economy and a more diverse economy. In order to do so, they need to create an infrastructure, and we are a company that provides infrastructure. We can provide power generation units, we can provide water purification and water dissemination units, we can provide aircraft engines, we can provide all those things that are helping a country, a region, an economy to build infrastructure and to start growing, so that is our interest in that part of the world.

 

Ipek Cem: When you talk about the different business segments, and you mention that in Turkey you have been present for a while, but perhaps the recent acquisitions revived your presence in Turkey. Now are you looking to place more emphasis in your existing businesses in Turkey and you also have some R&D along with TÜBITAK, I believe, and these facilities in Turkey. What is the prospect on that?

 

Nani Beccalli: There is a evolution of GE in Turkey, as there is a evolution of GE. When we started our activity in Turkey, it was light bulb manufacturing. If you look at the importance of the light bulb business, today, for GE, it’s very very small compared to many other businesses that are becoming very strong. So you are talking about the R&D facility, there is a manufacturing facility, which is a joint venture to manufacture aircraft engine components. Now, the aircraft engine is one of the fast growing businesses, which we have, and then we are in Turkey, manufacturing components for the fast growing business. The acquisition of the share of Garanti Bank is the meaning of the fact that GE is also very very strong as a company in the financial services. We have a very large commercial finance business, and we have a very large consumer finance business. Consequently we look at Turkey as a platform for these business, in order to grow. So there is a revolution of the company, and this revolution is global, and consequently is the same kind of revolution also for Turkey. We are looking at the new businesses to establish in the market, in the Turkish market.

 

Ipek Cem: After the departure of Jack Welch, in 2001, you seem to have taken a more marketing orientated approach with you new CEO Jeffrey Immelt, and also a little bit of a focus on “company to country”, I believe you call it, especially in developing countries. Can you specify a little bit how this approach works for developing countries?

 

Nani Beccalli: Let me start with the fact that Jack was operating in the eighties and nineties in a world that was growing very fast, so the growth was not a concern. The concern was how to organise better internally in order to satisfy this growth. Now here we are in the Twenty-first Century, and all of a sudden the growth is not any more the one that we experienced in the eighties and nineties. So the company has to gear itself up in order to be able to grow faster than anybody else, grow faster than the normal economies are growing, and consequently this emphasises a shift from internal processes like Six Sigma, digitisation, and so on, to more of a customer emphasis, more on a how are we going to grow the company in areas where we were not before. So, you know, the globalisation of the company went through three different phases, which are important, and I think you can identify them with each one of the Chairmen. Reginald Jones, for instance, globalisation in neighbouring countries like Latin America, and in countries where it was relatively easy to operate, the UK, same language, same legislation, and so on. Jack had to move the frontier forward, Jack had to go expand very much into France, expand into Italy, expand into the European country, into Japan. But these were also the established economies, the developed world. And now Jeff has to go, has to lead us, to where we’ve never been before. Into countries that are maybe a little more complex to operate, and here we are developing businesses in Russia, developing businesses in Africa, developing businesses in the Middle East, and so on. Because of the size of our company, in some of these countries the only people who can truly understand the importance of having GE in their own country, in their own regions are really the people who are running the country, the people in the government, and consequently our effort to establish a direct relationship with a government, because it is going to contact the people who can really see the full breadth and width of the products and services that we offer and can take advantage of it. You know, when you talk to a customer about turbine, sure you talk to a customer about turbine, the customer will understand that specific environment, but might not connect the fact that GE is also the producer of… you name it… some other kind of product which might be very interesting for that area. Now when you talk to the government, they sure are interested in turbine, but they should also see the opportunity also of doing something else, and something different. That is the reason for the “company to country” approach, which has in this moment some very interesting examples. In China, for instance, I would say China was the original place of “company to country”, and to go on a smaller scale, the country of Qatar where we are also taking this kind of approach, but it is really an approach that we take in developing countries.

 

Ipek Cem: In China you have about five billion dollars of revenues that came from China in 2005. How do you see your revenues coming from big countries like China or India going forward, because I know that GE has this proclaimed eight per cent organic growth objective? And how do you feel that growth is going to be impacted from countries high growth countries like those?

 

Nani Beccalli: It is definitely one of the pivot around which our strategy hinges. The fact of establishing the strong presence of the company in these economies that are growing faster than the other economies, you know, the economy of China grows nine, ten per cent and so we have to be part of that growth in order to be able to grow our total company by eight per cent. It doesn’t mean, however, that we forget completely about the developed countries, because when you talk, for instance, about Japan and Germany, two very interesting countries, two examples of high technology, for instance, where we can still grow very fast, and very much because our business position, or our position in the share, the share of the market, is not – yet – where we think we could be. So you know there are two pronged approaches. On one side you have developing countries growing at the rate at which they are growing – nine, ten per cent – seven per cent for India, the Middle East, spectacular kind of growth, on the other side there is a penetration in markets that are already well-developed, well- established, but where our position might not be the one that we believe we can have. So this is the way we try to achieve the eight per cent organic growth.

 

Ipek Cem: Globalisation is a much contested issue. Some people say it brings riches to the developing nations, some people argue otherwise, that it makes the poor poorer. You know all the arguments. How does GE try to benefit the communities in emerging countries, or communities in Africa? Do you have social responsibility projects geared towards the poor? What do you feel… personally… about this topic?

 

Nani Beccalli: First let me make a comment, before that, around the entire globalisation concept, which I think is the result of protectionism, and in most cases of fear. Fear of something that people don’t know. Because as soon as people start travelling, going around the world and seeing the opportunities, they understand what globalisation is all about. Anti-globalisation is something you can say that is sort of a product of lack of knowledge. On the other side, a company like GE has to be really committed to the areas, to the places, to the environments where it is going. I can give you one example, for instance, which is probably one of the most satisfactory examples that I had in my professional life. I was running the plastics business in the Americas, so North and South America. We had a plant in Campinas, in Brazil. Of course a plastics business needs to have safety procedures because you have people who have to work around equipment which is fairly dangerous pieces of machinery. In order to be able to understand safety, you need to be able to read, to read the instructions. Or in case of emergency, you have to be able to read what it says. And we discovered that a large portion of our 200 or so employees that we had in Campinas couldn’t read or write. So what we did was we started a school. And we put all the people who couldn’t read or write, we put them through a first degree kind of school, so that they were able to develop these basic skills. I left the business, and I started running another business in the capital in the financial services. Then one day I received a letter, which was written in Portuguese, it was written in a fairly simple way, but it was from one of these people that was thanking me by the fact that the company providing this basic instruction was able to open new horizons and new opportunities to them. You know, you receive a piece of paper like that and believe me: it makes your day; it makes your month; it makes your year. Because you do realise of a sudden, that in doing this, you are really creating opportunities for people, so in my mind this is globalisation in the true sense of the word. Yes, we know that there are people that exploit globalisation; there are people that exploit kids work, and that kind of stuff. But this is not GE. We have a code of conduct. We have certain behaviour, and we have a sense of protection of the environment, and the people that are working for us. And that’s for us what globalisation is.

 

Ipek Cem: You have over three hundred thousand employees in GE and coming from many nations. How can, how is it possible to give them a same sense of spirit, or a same sense of direction? I know that GE is famous for introducing management principles like Six Sigma and others, but how is it possible in this day and age?

 

Nani Beccalli: We have a profound culture, which is you know the big building block of GE. It is a culture that was developed over a hundred twenty seven, a hundred twenty eight years of history. But it is a culture that has evolved, that has changed. And why it is strong, but evolving. And why it is evolving because we try to get from all the people that are a part of the organisation, we try to get something out. So we are learning about China – we talked about China – we are learning about China and we are trying to integrate some of the Chinese way of doing things in our culture. We talk about Turkey, we learn from our Turkish partner, we learn out of the Turkish market, our Turkish employees, and we try to bring them in. For instance, the women that are a part of our Turkish organisation are strong supporters of the women network – we have a network that is an organisation to support the growth of the women – and they are some of the strongest participants, and they are bringing a new, fresh mind, mentality and concept in the women network. And then how do we do it? You know, Jeff Immelt, the Chairman of the Board, he basically makes sure that the top four hundred people of the company are really reflecting the values and the principles of the company that he wants the company to represent. And then he trusts these people to be able to go down, like a ripple effect, to go down into the organisation and portray the same kinds of values, the same kind of mind, the same kind of mentality. That is the way a company of three hundred and twenty five thousand people is able to homogenise the culture.

 

Ipek Cem: You have visited Turkey in the past and we hope you’ll visit us again, (BECCALLI: Absolutely.) and you also know that in the EU I travel a lot, to Brussels, and to other European capitals, and I always am disillusioned by the way some of the Europeans perceive us and feel that our being in the EU is unwelcome for this or that reason. How do you feel a country like Turkey can better sell itself? Maybe we sold ourselves to you, but in terms of being understood by our European friends.

 

Nani Beccalli: Let me start answering saying I am in favour of Turkey joining, in one form or the other, the European Union. For two main reasons. Europe is an aging population, is an aging entity. Turkey is a young fresh entity, so you bring, you mix the two things together, and you decrease the average life, shall we say, of the Europeans, and you bring a totally new force into the European economy. It is also a big economy, and consequently it is a big population, and consequently we will need that, as Europeans, in order to contrast in the future the upcoming Asian economies, which are going to be very strong. And the United States on the other side. The second reason why I think that Turkey is important for Europe is because, as I said at the beginning, is the pivot between Europe and the Islamic world and the Islamic environment. And we cannot be blind, any more, to that kind of relationship: as a matter of fact we need to work with the Islamic world, to sort out some of the many problems that there are nowadays. Consequently the participation of Turkey into the European Union would help in clarifying some of these ideas. How do you sell yourself? Well, you sold me, with me travelling down to Turkey...

 

Ipek Cem: I believe so...

 

Nani Beccalli: ... and visiting, and seeing, and talking to your leadership, to many of the leaders in Turkey. And seeing the life in the two major cities, in Istanbul and Ankara, enjoying it, and being part of some of the activities in Turkey. And really seeing the potential. Seeing what can be done with a country like Turkey. And I think that what you need to do: You need to continue to bring people in, you need to continue to advertise. To work on the political level, of course, which is important, but I think that the more you show who you really are the better it is.

 

Ipek Cem: Basically one of the things that GE is very much affiliated with is the Olympics. And it’s a topic that interests all over the world. How do you view that relationship building, and the Torino Olympics? For example you are from Torino, also, so I want to ask you especially if you felt that it was a success?

 

Nani Beccalli: It was a big success. There are two things that you have to look in our participation to the Olympics, that is an image and there is an economic factor. The image, the association of our company with the five rings, is extremely important because there is a certain perception of the five rings of the Olympic there is the perception of competition, but fair competition; it is a clean, good image. So for us to associate with this image is very positive, and on top of that it allows you to spread you name into the world more than what we did before. The second one is economic, because we have the rights to supply within our space of expertise, certain specific equipment that is needed by the Olympic Committee, by the Organising Committee in order to play the Olympics. So for example in Torino we sold sixty six million dollars worth of goods.

 

Ipek Cem: Some business, some pleasure?

 

Nani Beccalli: It is business and pleasure. It is business and pleasure. In Beijing, we are looking for a very very large amount, it could be as eight hundred, nine hundred million dollars of supply. You have to consider that Torino’s paid about three billion dollars for the organisation, Beijing is going to spend thirty two billion dollars, so there is considerable difference between the two. And I was already over in Vancouver, which is Winter Olympics of 2010 to talk to the Vancouver Olympic Committee, to talk to the mayor of Vancouver, to start laying the ground for the next Vancouver Olympics. So, you take it from quite far away in developing the relationships, in order to do the two things. The image on one side, and the business on the other side.

 

Ipek Cem: And your affiliation is going to go all through to the London Olympics?

 

Nani Beccalli: To the London Olympics in 2012.

 

Ipek Cem: You have something called eco-magination, which is basically focusing on R&D, for eco-friendly products, and giving emphasis to the eco-friendly products. This initiative, you are also very active in the energy field, and I want to ask you, how do you feel alternative energy options are developing in the world? Given the energy crisis, given some of the political crises in the Middle East.

 

Nani Beccalli: Well we have to, we are forced to develop alternative options from the fossil fuel – from oil particularly – and as far as fossil, we should develop a lot of the carbon, coal part. But of course you cannot just use carbon the way it is, coal the way it is, you have to make sure that you have a clean burning carbon. So, technologies are concentrated on the development of a clean way of burning coal, on one side, and the development of alternate sources of energy. And GE is involved in each one of them. We have a technology, which we are developing at this moment for the manufacturing of gas out of coal, so that you have a clean burning, eliminating some of the obnoxious substances. We have, we are working in all the alternate sources of energy: wind; solar; bio-mass; and nuclear. And I believe that nuclear is really going to be the biggest alternative source of energy in the world, to try to minimise the negative effect of the fluctuation of the price of oil. Nuclear, today, is the cheapest, and if you look at the performance, it is also one of the safest and eco-friendlier that there is today, in production. So I think that, I think there is in this moment among the different governments the understanding of the situation and there is also the preparation, shall we say, of the ground to be able to build more nuclear power generating stations.

 

Ipek Cem: When you operate in over one hundred and sixty countries, you are bound to become a quasi-political animal, I would think, in the sense that while clearly you are US origin company and on the other hand, you have to deal with different governments all around the world, so when the US policy is, for example, not very lenient towards one country such as Iran, which was the case, how does that impact GE’s operations in Iran? Or similar cases?

 

Nani Beccalli: I call myself…. I am the self-appointed Minister for Foreign Affairs for the company, in recognition of the fact that my work is very much orientated towards the politicians, but not only towards the politicians, the big customers, you know the customers who are global customers, the ones that are going, that are buying from more than one of our businesses, and also internally, I make sure that the message of the company comes through internally. It is clear that we are “super-national” – meaning that we are not tied to a particular politics… policy of a particular country, but on the other side there are a certain amount of events that are affecting us. You know, the situation with Iran. The situation with Iran is not only a US-Iran situation, it is US, it is Germany, it is France, it is England, I mean it is all the Western world. And we are definitely a Western-based company, although we are global, but some of the roots of the company are Western. And what we are trying to do, we are trying to do the right thing. We try to make sure that we are not breaking any kind of law, actually we are NOT breaking any kind of law, and so if there is a rule from a country that is established of not doing certain things, we don’t do certain things. But the country can be, can be United States, or can be Burkina Faso You know, it can be one of the African countries. I mean, we try to be – we try to operate it in a way that is clearly recognisable by everybody as above and beyond any kind of suspicion.

 

Ipek Cem: So does that mean you continue to do business in Iran.

 

Nani Beccalli: We are not doing business in Iran because most of the Western world is not doing business with Iran in this moment. Because also, as you realise, there are certain tensions which could compromise the security and the safety of our people, and we try to avoid putting our people in that position.

 

Ipek Cem: I see. I’ve read that you define yourself as “I work like an American, I dress and eat like an Italian, and I think like a European”. Is that so? So how do you define, really your global self? And how you operate?

 

Nani Beccalli: Like I describe. You know I… my working culture has been developed in GE, and within GE there were a lot of… I worked for very many years in the United States, so I did learn that kind of working habits. I do enjoy life, as an Italian. So I do eat and dress like an Italian, but I kind of try to live like an Italian. And I want to think as a European as I think that that is the big reality that is going to make this part of the world a better part of the world. I believe in the European concepts. I believe in an enlarged Europe. I believe in a powerful – but not militarily powerful – in a Europe that is capable to assert its position in the world. And so that is why I come up with that kind of a definition.

 

Ipek Cem: What do you think of the recent developments in Italy, the elections and the change of power. Do you think it’s going to be a stable Government?

 

Nani Beccalli: That is a very difficult answer to give, but I think that when you have a fifty fifty, I mean twenty-some thousand votes of difference, you are automatically bound not to have a stable government. And that’s bad. It’s bad because Italy in this moment needs strong leadership, Italy in this moment is to take some tough decisions on some very important issues, and this will be a somewhat difficult period of time for Italy. You know I believe that bi-polarity is important, I believe that nowadays governments in varying Western democracies have very little margin of manoeuvre to be different, so sometimes you need the right government, sometimes you need a left government. It depends on the needs of the country. But the two of them have a margin of difference, one from the other. But you need a strong government. As a matter of fact, I do appreciate the political maturity of the Germans, that – recognising the same problem – have created a “Grosse Koalition” and so they are able to have a governing entity which is probably not moving as fast as one of the two could move, but it is moving, and it is moving solid, you know, is going forward. So I think that the Germans have beaten us as far as political maturity is concerned.

 

Ipek Cem: Well, we hope the best for Italy and for GE, and I would like to thank you very much for this interview. It was a pleasure.

 

Nani Beccalli: Thank you very much.

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.