GE's Immelt: No U.S. Upturn Until 2003

General Electric Co's plastics order book suggests the U.S. economy is not likely to begin improving until next year, Chief Executive Officer Jeff Immelt said on Monday.

Immelt said told Reuters after a speech in Brussels that he watches GE's plastics business as a guide to wider economic performance in the future because plastics use pervades industry and it has a short business cycle.

``Customers' inventories are very low, but we haven't seen order rates start picking up yet and that's our leading indicator,'' he said in the interview. Immelt added that historical patterns suggested the recession would end by 2003.

Despite the economic conditions, Immelt said his company looked forward to expanded investment in Europe at the same time as it is establishing a European headquarters in Brussels.

Immelt said the company was interested in expanding its businesses in healthcare, aircraft engines, power systems, CNBC business television channel and its financial arm, GE Capital.

Immelt said the company was likely to stick with the businesses it already knows ``without getting into a completely different industry. I don't think that's something we need to do short term.''

Immelt, who took the helm of the world's largest company by market capitalization on September 7 from legendary Jack Welch and is the company's chairman of the board and chief executive officer, was in Brussels to speak to a business group.

It was while Welch was at the helm that the European Commission in Brussels created an international furor last year by rejecting GE's proposed $45 billion purchase of Honeywell International.


Immelt said that the company was continuing to evaluate the break-up plans of conglomerate Tyco International Ltd for possible acquisition targets. Tyco said earlier this month that it would restructure the conglomerate into four independent, publicly-traded companies. It also plans to sell its plastics business and would entertain offers to buy other businesses, which include healthcare, electronics, security and fire protection. ``We just don't know that much about the company, but clearly it's a situation we will look at,'' he said. Any decision about a purchase would be premature, Immelt said.

Immelt said that research and development was essential to the company's continued strong growth and was necessary as the firm increases the number of its products by 25 percent this year.

GE said earlier this month that it would spend $100 million to renovate its research and development headquarters in upstate New York.

GE executives said they would particularly like to boost their position in Germany and were also looking east to Russia.

``We have to improve our position in Germany,'' said Ferdinando Beccalli, the new president and chief executive of GE Europe, which will have headquarters in Brussels.

Immelt also said the company was looking at the Russian market for potential investments and that while there were no plans to build a factory the country had a highly educated population and good natural resources, ``two things that go at some point with prosperity.''

Despite the recession, GE managed to post a 9.7 percent rise in fourth quarter earnings and said earlier this month that it would meet its previously stated goal of increasing earnings by 17 to 18 percent in 2002.

Shares of GE closed at $38.27 on the New York Stock Exchange on Friday. Over the last year they have fallen 14 percent.