DETROIT General Electric Co Chief Executive Jeff Immelt said on Friday the United States needs to refocus its economy on manufacturing and exporting if it wishes to recover from a brutal recession.
The world's largest economy can no longer count on consumer spending to drive demand, nor can it rely on Wall Street financial wizardry if it wants its population to continue to enjoy a high standard of living, the head of the largest U.S. conglomerate said.
"We should clear away any arrogance, false assumptions, or a sense that things will be 'OK' just because we are America," Immelt told the Detroit Economic Club. "Our competitive edge has slipped away and this has hit the middle class hard."
The U.S. should work to have manufacturing represent about 20 percent of employment, more than double its current level, he said.
The world's biggest maker of jet engines and electricity- producing turbines said on Friday it would be building a new manufacturing research center outside Detroit that will employ 1,100 people.
The move reflects Immelt's belief that, like many U.S. companies GE has turned too many core technological procedures over to outside contractors and foreign operations.
"In some areas, we have outsourced too much," Immelt said, according to a copy of his prepared remarks. "We plan to 'insource' capabilities like aviation component manufacturing and software development."
The United States need to reduce its reliance on financial services to drive economic growth, Immelt warned.
"While some of America's competitors were throttling up on manufacturing and R&D, we de-emphasized technology," he said. "Our economy tilted instead toward the quicker profits of financial services."
That is a lesson GE has learned -- its shares have lost some 58 percent of their value over the past year, largely the result of falling profit at its GE Capital finance unit. Immelt is restructuring GE so it will count on finance for just 30 percent of its profit, down from half before the downturn.
"While our financial services business has performed well, I can't tell you that we were entirely free of these errors," Immelt said. "We weren't."
(Reporting by David Bailey and Soyoung Kim; writing by Scott Malone; editing by Andre Grenon)