TIME Business

GE Makes a Big Bet on Manufacturing

Rana Foroohar is TIME's assistant managing editor in charge of economics and business.

The company’s plan to make things again is a test for the entire American economy

If one company mirrors the travails of American business over the past decade, it’s General Electric. The manufacturing giant founded by Thomas Edison in 1892–and the last of the original firms in the Dow Jones industrial average still listed on that index–grew into a multinational powerhouse that made everything from lightbulbs to locomotives as the U.S. became the world’s lone superpower. Its nickname said everything: Generous Electric. But by the time the 2008 economic crisis hit, GE had gone from being an industrial innovator to being the country’s sixth largest bank, relying on financial wizardry rather than engineering to satisfy investors.

Perhaps the most enduring quality of the broader economic recovery since then has been the gap between reality and perception. While growth and jobs are up, only about 1 in 4 Americans believes the economy is getting stronger, according to a recent survey by the investment firm BlackRock. The reason is clear: personal incomes aren’t rising, except at the very top. Historically, the key to achieving broad income growth has been creating more middle-income jobs. And those have traditionally come from the manufacturing sector.

Which is partly why, in order to save his company, CEO Jeffrey Immelt borrowed $3 billion from Warren Buffett and vowed to retool GE–away from complex financial schemes and back toward making things. GE, in other words, is trying to do what the U.S. as a whole needed to do: rebalance its economy and get back to basics.

So, six years on from disaster, how is it going?

Immelt has made progress. With the recent spin-off of GE’s consumer-finance division, which peddles financial products ranging from private-label credit cards to auto loans, the share of profits that comes from finance has gone from more than half to about 40%. The target is to get it back down to around 25%. As CFO Jeff Bornstein recently put it to me, “We had to decide whether we wanted to be a tech company that solves the world’s big problems or a finance company that makes a few things.”

GE’s executives are betting on a few megatrends, including the belief that emerging-market economies are entering a period very much like the post–World War II period in the U.S. Those countries will need new houses, bridges, roads, airports and all types of consumer goods in unprecedented quantities. The McKinsey Global Institute estimates that by 2025, emerging-economy nations will spend more than $20 trillion a year in this way. That means that future economic growth may well be centered on making things, rather than trading on their value.

To help capture its share of that action, GE is trying to copy some of Silicon Valley’s methods. The company has set up a “growth board” that operates like an internal venture-capital firm, vetting new ideas presented by employees and then dishing out a bit of time and capital to explore them. The result is that production cycles for projects like new oil-drilling equipment or LED lighting systems are shortening dramatically. An idea that once took two years to test might go from paper to production in 45 days.

The firm is also sourcing new ideas from the crowd. One recent design for a bracket on a jet engine came from a 22-year-old in Indonesia who had tapped into a website where the company posts problems and offers payouts to whoever can solve them.

Still, the big question is just how many good new jobs America’s industrial firms, small and large, will actually create in the coming years. So far, the trends are positive. In October, the Boston Consulting Group’s annual survey of senior manufacturing executives found that the number of respondents bringing production back from China to the U.S. had risen 20% in the past year. GE’s new hub in San Ramon, Calif., which was launched more than two years ago to explore the burgeoning “Internet of things” (i.e., machine-to-machine communication via the Internet), has gone from zero employees to more than 1,000. The company is also using more local small and midsize suppliers, thanks to new technologies like 3-D printing that let startups achieve more speed and scale.

Such trends at GE and elsewhere have yet to replace the 1.6 million manufacturing jobs lost in the recession. The good news about our postcrisis economy is that it is smarter and nimbler and growing in the right sectors. The bad news is that it still doesn’t have enough good jobs for those who need them. The way forward may be clear, but getting there is another story.

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TIME Parenting

If Cars Can Monitor Left-On Headlights and Rear Obstructions, They Should Be Able To Save Trapped Kids’ Lives

Today, technology saves your car battery—tomorrow, it could save your child

Thursday is National Heatstroke Prevention Day, so here is a little fact for your awareness: In the past 20 years more than 670 U.S. children have died of heatstroke in hot cars. To date this year KidsAndCars.org has recorded 18 such fatalities, including the death last week of a 10-month-old girl in Wichita, Kansas, who was unknowingly left in a vehicle on a 90-degree day.

Our national advocacy nonprofit works year-round to educate parents and caregivers about these dangers, including a nationwide “Look before you lock” program. But education is not enough when all it takes is a simple change in a daily routine to cause a parent to drive past their childcare center and forget their child in the back seat. Current state laws require putting your baby in a rear-facing child safety seat, which has saved the lives of thousands of children in car crashes. An unintended consequence of this shift is that when out of sight, quiet little unobtrusive passengers can slip out of mind.

How can we prevent this failure of memory? The auto industry obviously recognizes that we’re human and our memories often fail us: our cars are able to warn us if we leave our headlights on, our keys are in the ignition, a door is open, we’re low on fuel, if our seatbelt isn’t buckled… If we can monitor our headlights or gas levels, we should be able to get a signal that a child has been forgotten.

Some of the technology options currently on the market include car seat monitors and alert systems, key fobs connected to car seats that sound a reminder and weight-sensitive mats. One system activates when the driver has opened the back door to strap in the car seat, and then sounds a reminder chime when the driver leaves the vehicle. Mobile apps have hit the market, such as Cars-n-Kids Carseat Monitor, which connects with the carseat via a sensor, or the Amber Alert GPS, which tracks your child in or out of the car.

These after-market systems may be useful reminders to some people, but they have not all been tested, and they are not the failsafe solution we need in every vehicle. Furthermore, a 2012 study on “Evaluation of Reminder Technology” sponsored by the National Highway Traffic Safety Administration and conducted by the Children’s Hospital of Philadelphia found that a few of these systems were not always reliable.

Safety is something every family deserves. It shouldn’t be optional, like 4WD or leather seats. And it shouldn’t be political. The federal government and automakers along with safety advocates have the ability to solve this problem.

KidsAndCars.org recently launched a petition to push the Obama Administration to authorize the U.S. Department of Transportation to provide funding for research and development of innovative technologies to detect a child left alone in the rear seat of a vehicle, such as infrared breathing sensors (a technology that already exists in certain baby monitors for the home). We also spearheaded an initiative to adopt federal safety standards that require all vehicles to be equipped with trunk release latches to prevent trunk entrapment, safer power window switches to prevent strangulation, and brake transmission shift interlock systems so children cannot inadvertently knock a vehicle into gear. In March, the DOT issued a rule requiring rear visibility systems, such as cameras, as standard equipment on all new passenger vehicles by May 2018.

Today, technology saves your car battery. Tomorrow, it could save your child.

Susan Pepperdine is the public relations director of KidsAndCars.org, a national nonprofit group dedicated to preventing injuries and deaths of children in and around motor vehicles.

TIME auto industry

GM Recalls Another 7.6 Million Vehicles

Six recalls announced on Monday greatly expand total number of recalled vehicles to over 25 million

GM announced Monday that there will be six more safety recalls involving 7.6 million vehicles made from 1997 to 2014.

Among the recalled vehicles, GM said it is aware of seven crashes, eight injuries and three fatalities. “We undertook what I believe is the most comprehensive safety review in the history of our company because nothing is more important than the safety of our customers,” GM CEO Mary Barra said in a statement on the company’s website. “Our customers deserve more than we delivered in these vehicles.”

“We have worked aggressively to identify and address the major outstanding issues that could impact the safety of our customers,” Barra said. “If any other issues come to our attention, we will act appropriately and without hesitation.”

The latest recall brings the number of vehicles affected to over 25 million, USA Today reports. GM expects to set aside $1.2 billion in the second quarter for the cost of recall-related repairs, which includes $700 million already announced.

TIME Economy

We’ve All Got GM Problems

Insular management and lack of responsibility are hurting big firms around the world

General Motors CEO Mary Barra may have summed it up best when she described former U.S. Attorney Anton Valukas’ 325-page report on the company’s ignition-switch problems, which resulted in numerous deaths and millions of recalled vehicles, as “extremely thorough,” “brutally tough” and “deeply troubling.” It was all three and then some. But the report also illuminates a systemic problem in most big corporations as well as governments–insular management or, in the parlance of gurus, information silos.

Valukas found that GM didn’t fix its ignition-switch issues quickly or correctly because the company’s many departments and employees literally weren’t communicating with one another. The engineers who were looking into reports of cars’ stalling while moving didn’t know that engineers elsewhere in the company had designed air bags that would not deploy when cars were technically off. That meant engineers made different decisions about fixing the switch problems–decisions that ultimately led to over a dozen deaths.

But it was GM’s culture, in which silence and buck-passing were raised to a Kafkaesque art form, that kept these silos in place. Valukas’ report brings to light a number of tics that were unique to GM. There was the “GM nod,” for instance, in which everyone nods with respect to a certain course of action before leaving a meeting and then does nothing at all. And there was the “GM salute,” firmly crossed arms pointing outward toward others, signaling a steadfast refusal to take personal responsibility.

The problems of information not being readily shared and personal responsibility not being assumed are old ones. “Napoleon wanted to create a military without silos,” says Ranjay Gulati, a Harvard Business School professor who has spent 15 years studying silos. “Adam Smith spoke about the problem of labor silos. Events like 9/11 could have been prevented if there had been more sharing of information across organizational divisions.” Indeed, many of the biggest corporate debacles in recent years have been linked to information silos. The Rana Plaza disaster in Bangladesh, in which more than 1,100 garment workers were killed when a poorly built factory collapsed, was due in part to the fact that major Western retail brands didn’t know who their suppliers were or what they were doing.

Big, complex companies are typically structured so that decisionmaking is separated according to function, geography and product. That naturally creates silos. Indeed, McKinsey research shows that the most globalized firms pay an economic price for this. Examples of silos in blue-chip firms abound: Sony once had two separate divisions working on creating the same electrical plug without anyone realizing it. (It’s not just old-school companies that are at fault. I was once offered a job at a well-known tech firm where I would run around talking to C-suite executives about what they were doing and report back to other top people in the organization.)

So-called silo busting is already a hot topic in academic circles. Economists, for instance, are trying to do a better job of predicting market movements by calling on experts in areas like biology, psychology and the humanities. Major brain-science initiatives now routinely bring together researchers across many fields to share data. But in big corporations, silos are a problem that is becoming only more pressing as the world becomes more interconnected.

How can companies bust silos? according to Gulati, the best way is to create a set of core values or a core mission that everyone in the firm understands. A good example of this is IBM’s decision, under previous CEO Sam Palmisano, to create a safer and healthier society via its Smarter Planet initiative. That goal, says Gulati, helped facilitate cooperation across divisions. It’s also important for firms to consider issues from the point of view of customers rather than insiders. Consider longtime Cisco CEO John Chambers, who famously was 30 minutes late to his first board meeting because he felt it was more important to take a call from an irate customer than to meet the people who’d be deciding his salary. Another way to bring down silos: hire outsiders. Research shows that women and minorities often communicate better across divisions.

On that score, Barra is perhaps better placed than most to solve her company’s problems. During her announcement about the report, she set a communal goal for GM–“to set a new industry standard in safety”–and told employees to email her personally if they felt customers’ safety was ever in doubt. Silo busting starts at the top, and if Barra does it at GM, it could set an example for all large institutions.

TIME Advertising

Here’s a Bunch of Super Old People Telling You to Be Totally Hardcore

Awesome

You’ve probably been told at some point or another that you can learn a lot from your elders. Auto manufacturer Dodge has now gathered a whole bunch of them—many more than 100 years old—to impart some of the wisdom they’ve gained over their long lives. The result is a new ad commemorating the 100th anniversary of the first Dodge. In the spot, men and women as old as 106 share the type of hard-earned knowledge that only comes from a long life on this Earth. Their responses start sweet and then…we won’t spoil it.

Dodge is hoping to expand sales of its muscle cars with updated versions of the Charger and Challenger. The Chrysler-owned brand unveiled two new versions of the cars this week at the New York Auto Show. Last year, Charger sales were up 19% to nearly 100,000 cars sold, making it one of the best-selling full-size cars. This year has been a different story: during for the first three months of 2014, sales dropped 4.4% versus the same time in 2013. Over all Chrysler Group sales last month were up 13% compared to the same month the year previous. It was Chrysler’s best March sales performance since 2007.

TIME General Motors

Families Demand Answers From GM ‘Murderers’

Families who lost loved ones in accidents connected to an ignition defect in GM cars slam the auto giant as CEO Mary Barra testifies before Congress

On Jun. 12, 2009, a 19 year-old, soon-to-be South Carolina University freshman named Sarah Trautwein lost control of her 2005 Chevy Cobalt, which veered right, then swerved back left head-on into a tree, killing her instantly. Almost five years later, Sarah’s mother Rene stood before the U.S. Capitol Tuesday alongside about 20 other friends and family members of those injured or killed in crashes associated with an ignition defect in several General Motors models that shut down power to the car and disabled the air bags.

“Now I have to relive this, and I have to think about her final seconds on this earth, and the panic that she felt,” says Trautwein, who found concrete evidence on Friday that the air bags did not employ properly in her daughter’s car. “That’s very painful.”

The outdoor press conference took place hours before General Motors GM Mary Barra was due to testify before a congressional panel investigating why the company did not fix the defect for ten years, and why the government’s auto safety regulator, the National Highway Traffic Safety Administration, failed to “connect the dots” about the life-threatening issue years ago.

Sens. Edward Markey (D—Mass.) and Richard Blumenthal (D—Conn.) will push for a legislative fix that would require auto manufacturers to submit an accident report to NHTSA’s Early Warning Reporting database any time their vehicle or equipment was implicated in a fatality. Rep. Henry Waxman (D-Calif.), the ranking member of the Energy and Commerce committee that will host today’s hearing, will introduce a bill in the House based on failed 2010 legislation that would boost the enforcement authorities of the NHTSA. But he said GM ought to go further to help those who lost loved ones in crashes linked to the defects.

“I think that the victims need to be compensated,” said Waxman. “I don’t think GM ought to stand behind the statue of limitations or any other legal technicality—I think they have an obligation…to correct the problem and compensate people who deserve it.”

Barra, who was named GM’s CEO in mid-January, is expected to apologize to those close to the 13 victims killed in crashes linked to the defect, as well as show what steps GM is taking to counteract the crisis. “This latest round of recalls demonstrates just how serious we are about the way we will do things at the new GM,” Barra will say before the House panel Tuesday, according to an advance copy of her opening statement released by the company. “We identified these issues. We brought them forward and we are fixing them. I have asked our team to keep stressing the system at GM and work with one thing in mind—our customers and their safety are at the center of everything we do.”

But those who have felt the effect of the company’s flaws first hand aren’t likely to find solace. Trautwein met with Barra for an hour at a company office Monday night, along with other victims’ families. “I don’t feel that it was worth the time, to be honest,” said Trautwein, who believes that the GM employees responsible should go to jail. “‘I’m sorry’ doesn’t help us at this point…I think by the tenth or whatever parent it was, we asked her to stop saying sorry.”

“I think they are murderers,” she adds. “They’ve hidden this.”

TIME

China is Trying to Buy a Car Industry

CHINA-ECONOMY-CARS
Workers on the assembly line at the Sino-French joint venture Dongfeng Peugeot-Citroën Automobile (DPCA) plant in Wuhan in China's central Hubei province, Dec. 2013. PETER PARKS—AFP/Getty Images

Struggling Chinese automakers are turning to foreign acquisitions for a competitive edge

China has had dreams of turning Shanghai into a 21st-century Detroit – no, not a bankrupt basket case, but a major center for the global automobile industry. But those hopes have been dashed. Though China is the world’s largest car market, and Chinese have become avid drivers (as you can read in my latest TIME magazine story), the nation’s automobile manufacturers have struggled to catch up with their international rivals.

Generally lacking technology, experience and brand power, Chinese carmakers have faced hurdles even competing in their home market, where Chinese consumers think homegrown cars are of poor quality. As a result, foreign brands like Volkswagen, Buick and Hyundai, command 70% of the Chinese market, Overseas, Chinese cars tend to get exported to other developing countries where shoppers care more about price than nameplate.

What to do? Chinese car companies appear to be trying to buy the technology, know-how and market presence they have struggled to develop on their own. Recently, the global auto industry has seen a series of high-profile deals by Chinese car companies. In February, state-owned Dongfeng Motor agreed to invest some $1.1 billion in troubled automaker Peugeot-Citroen, as part of a rescue package that includes the French government. A few days earlier, Chinese car parts maker Wanxiang won an auction for the assets of Fisker Automotive, a bankrupt U.S. manufacturer of hybrid sports cars. (Last year, Wanxiang also completed the acquisition of most of bankrupt U.S. battery maker A123 Systems.) Then, earlier this month, a unit of China’s FAW inked a joint venture with Michigan-based EcoMotors, a start-up backed by Bill Gates, to manufacture the latter’s environmentally friendly engines. The FAW subsidiary is picking up the entire bill for the Chinese facility, an investment of more than $200 million.

These latest deals follow in the footsteps of the granddaddy of Chinese auto acquisitions: In 2010, private Chinese carmaker Geely bought storied Swedish firm Volvo from Ford. Recently, the two said they were expanding cooperation to develop a new subcompact model.

What’s happening here is that China’s carmakers, with ample access to financing, are using their money muscle to buy technology, market share and access to new product lines that would have been difficult and time-consuming to develop on their own. (In this way, the auto deals are similar to those recently announced by Chinese PC maker Lenovo for Motorola’s handset business from Google and IBM’s low-end servers.) That’s why China’s asset grabs have led some critics to fret that the West is handing Chinese automaker critical know-how that will help them compete with heavyweights like GM and Ford, or even worse, can be used in military applications. After Wanxiang’s purchase of A123 was approved by a U.S. government panel, one senator complained that such technology developed in America “should not simply be shipped off to China.”

Yet as the old saying goes, beggars can’t be choosers. The Chinese (for the most part) are investing in companies or buying assets that have a very troubled history. It is an open question if France’s loss-making Peugeot, for instance, could even survive without a fresh capital injection. Chinese firms like Dongfeng have the money to save the day. Buying assets, however, is much different from using them wisely. It remains to be seen if these Chinese companies can capitalize on their purchases to turn themselves into better auto companies, or if they are capable of helping to turn around their troubled new investments. China’s car industry may find that cash can buy you stuff, but not easy shortcuts.

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