In this video, Engineering.com's manufacturing expert Jim Anderton shares his thoughts about GE's buyback plan and what he thinks the company should have done with $26 billion.
When stories cross my desk about firms as large as General Electric, I always take notice. Recently, GE made a significant announcement. The massive engineering firm with a century-plus history is about to sell its financial arm, GE Capital Real Estate, for more than $26 billion.
This is something General Electric CEO Jeff Immelt has been promising to do – to get GE back to its core competency of being an engineering-focused company. That's a great thing that should be applauded. Unfortunately, the $26 billion will be used to buy back stock. It's a popular technique these days because of the way markets are driven. The distortions caused by federal money printing means that it's a great way to return shareholder value and boost the stock price.
On face value that sounds reasonable, but I have to ask: what could the company have done with $26 billion in capital? Imagine the possibilities. Imagine the advances that could be made in medical engineering, in propulsion systems or even in energy.
GE has a storied history of making great products – everything from my mother's steam iron that lasted half a century to the J79 turbojet engine. But one thing I think could have been exploited here that is wildly under invested is fusion research. I don't mean cold fusion, I mean hot fusion. I'm talking about fusion on a smaller scale than what the National Ignition Facility is doing (the big money, government-funded research).
There are several companies working on this type of research that are starved for capital. A favorite of mine is a fusion energy project at Lawrenceville Plasma Physics in New Jersey – they're doing amazing things on a shoestring budget. Imagine if a firm with the resources of General Electric and their $26 billion windfall, got behind a project like fusion energy. My guess is the problem could be cracked in five to 10 years and the world would have a clean, essentially limitless energy supply.
I'm not suggesting this is the only way to spend the company's billions, but there has to be a better way than using it in a share buyback.
Thumbnail photo credit: Paolo Ferrarini on Flickr, via Creative Commons