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WHEN: Wednesday, December 2nd
WHERE: CNBC's "Mad Money w/ Jim Cramer"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with GE Chairman and CEO Jeff Immelt on CNBC's "Mad Money w/ Jim Cramer" (M-F, 6PM-7PM ET) Wednesday, December 2nd. Following is video from the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000461915.
All references must be sourced to CNBC.
JIM CRAMER: Mr. Immelt, welcome to Mad Money.
JEFF IMMELT: Hey, Jim. How you doing'? It's so great to be with you.
JIM CRAMER: Same thing, Jeff. Really is. All right, Jeff, we got to start with the fact that your stock has been the best-performing large capitalization industrial company in this market, rallying more than 18% this year, a leader in the Dow Jones average. What do you attribute the outperformance to? Simplification? Product portfolio? Perhaps a change in culture to a more industrial internet company? A bit of all three?
JEFF IMMELT: I think it's a bit of all three, Jim. Look, I think we've had a lot of things come together this year. The dispositions of GE Capital have happened fast and in a valuable way. I think the Synchrony spin has been a terrific value accumulator for investors.
Our industrial businesses are growing organically, faster than their peers with higher margin growth. And I think people look at the company now, they can understand it better. And I would tell you, Jim I've been doing this a long time. When I look at the next three years, you know, really the GE team knows exactly what we have to do. We've got all the tools to do it with. And I think from a capital allocation earnings growth, organic growth standpoint, we're a good bet for investors right now.
JIM CRAMER: Okay. I think people have to understand, because I love that you brought this up. Your organic growth – you're a big company – far exceeds most of the companies in your sector. Is it that long-term decisions are bearing fruit or just the fact that the portfolio fits the market and the times we're in?
JEFF IMMELT: I'd make two comments, Jim. First of all, you have to invest to grow. And I think the long-term bets we've made on technology, digitization, globalization – those are all paying off right now. And the second thing is, in a slow growth and volatile world, having – being in a multi-business structure allows us to really be able to play through this in ways that more single-purpose companies can't. So, while the oil and gas business may be tougher, the aviation business is booming. And you add all those up, and you get industrial organic growth in the mid-single digits? That looks damn good in the environment we're in right now. So that's what it takes.
JIM CRAMER: Now, I know that a trusted advisor of yours for a long time, Nelson Peltz who runs Trian, has purchased $2.5 billion of GE stock and is very encouraging to you, has penned a white paper. And it's a lot about what we're talking about, except for it's entitled, "Transformation underway but nobody cares." Thinks your stock could go from 40 to 45 end of 2017, but he would say that the way to get there is to return 40% of the current market capitalization, which includes borrowing a lot of money. Good idea?
JEFF IMMELT: So, here's what I would say. Look, we have a lot of great investors. I think having a long-only investor like Trian and Nelson in this stock is a good thing for all of our investors right now. And when you look at the future, I think the combination of organic growth, margin expansion, capital allocation that's more heavily weighted towards buy back through both GE Capital and the potential to take on more leverage, those things are pretty attractive. It should give us top-of-class industrial EPS growth and really be able to distinguish ourselves from a margin return standpoint at the same time. So, look, we have a lot of good investors that I think see this as a good way to really achieve value creation for our long-term holders. And look, I think the management team is completely aligned with that as being a good way for the company to go. We – you know, Jim, look, all that being said, organically, we're still investing in R&D, capital expansion, all those other things. But I think with GE Capital, we've got the opportunity to buy back a lot of stock, keep the dividend really at the at very attractive versus our peers and still grow the company organically, higher than our peer set. So, organic growth, margin expansion, return of capital to investors, that's a pretty good combo in the world we're in today.
JIM CRAMER: And it's also once you have the final disposal to Wells Fargo, this designated systematically important financial institution goes away, what will that mean for a new General Electric?
JEFF IMMELT: Well, look, I mean, I think we're substantially an industrial company. That's what we're set up to be. More than 90% of our earnings are going to be industrial. We no longer fit the screen of what has been a systemically important financial institution.
And it really allows us just to be what we are a high-tech, best-in-class industrial company where we use financing as ways to generate good returns and grow our industrial business. And I think from an investor's standpoint, from a capital allocation standpoint, it allows investors just to see us for what we are.
We should be a high-teens return, high-margin industrial company. And look, I think it's all kind of falling into place. It's one thing to have a plan. I don't think investors necessarily want to invest in a plan. But when you see it being executed in a systematic way, that's why I think you see more smart investors that want to get in the stock.
JIM CRAMER: Well, yeah, I was thinking of you as the world leaders convened in Paris over climate change actually my kids were asking me, "Dad, what company is most in position to actually benefit?" because this is all they really care about, Jeff. When you have kids, we know that's the future. And I said, "I've got to tell you GE is the company that is involved with trying to stop bad climate change."
JEFF IMMELT: So, Jim, look, we've been working on this for a decade, a decade. Long before it was cool, we were investing in clean energy, revenue growth in technologies. We have more than $25 billion of annual revenue that is really in clean tech, if you will, high-efficiency engines, wind turbines, energy efficiency. So, we are as well placed from a diversity and technical depth standpoint as anybody in the world to be able to participate as in this clean energy future.
Now the other thing I would say, Jim, is, look as part of the Alstom acquisition, we have an installed base that's coal. But customers are going to have to upgrade these plants to make them cleaner and more robust for the long term. So, look, there's a lot of ways to play this. From energy efficiency to upgrades to new technology. We can play all three. We can play every dimension of this game. And we plan to do so and we've been doing it for a long time.
JIM CRAMER: Now you did make some large bets in fossil fuels, including oil. Oil's come down big since then. Is it time to double down? Is it time to think that perhaps oil's a good investment? Or you just wait and say, "Look, it's part of the pastiche. It can't really hurt the company."
JEFF IMMELT: So, Jim, what I would say is the reason why we invested in oil and gas wasn't that we thought the price would be 140 or 100 or whatever it was. We could see the technical intensity of the industry growing. We thought the industry was largely undercompeted from a technology standpoint. And we still believe that today.
So, we think the long-term position that we've got in the oil and gas industry is going to bear fruit over the long term. You know, Jim, if I would have done this show ten years ago, right after 9/11, people would be asking me about the aviation business, right? For the five years from 2001 to 2006, the aviation business stunk in GE. Now it's amazing, right? So, we have the ability to play through these cycles opportunistically in ways that pure play oil and gas companies really can't. So, I think for the long term, I still believe in this business, but we really build our business around technical intensity, not trying to predict exactly what the price of oil was going to be.
And I see this even more relevant with lower oil prices than I did when oil prices were $100 plus. Look, at $100 everybody looks smart. Where we are right now, you've got to really be able to compete to prosper. And that's where we think we'll be.
JIM CRAMER: You know, I've been thinking also, the Alstom acquisition. When I go to Alstom's site and I go to what GE's saying about it, it looks to me that if you wanted to get out of coal, you would call Alstom. If you wanted to be able to build infrastructure that did not use – that did not hurt the climate, you would call Alstom. This acquisition, what will it mean for actual earnings power, though, not just feel good?
JEFF IMMELT: So, look, I mean, I think it's hand in glove, right, in terms of what we know how to do. We've got a progression of earnings over the next, oh, let's say, two, three, four, five years that get it up. You know, we're talking about five or six since next year, more the year after, more the year after.
So, we've got to build into the plan. But what I would say, Jim, is, look, this is all about execution. And if the GE team executes the way I know we can, we're going to make a lot of money for investors as we look at Alstom going forward. Because it's complementary technology. It's everything we know how to do. And we feel great about our ability to execute. This is 100% in our control about execution. Those are the deals you want – you know, look, this was four times EBITDA after synergies, right? So, we ought to be able to make a good return for investors on a deal like this.
JIM CRAMER: All right. Well, I want to finish on something. There's a great ad you guys are running. A guy comes to a lot of smart people say, "Where are you working?" You're working at GE." This is about, obviously, the digital economy. And I just want everyone who's watching to understand where you've taken the company and how it is an internet industrial and what that actually means for earnings, for dividends and for the future.
JEFF IMMELT: So, Jim, this is may be one of the most important things that your investors can think about. There's a lot of buzzwords out there, the internet of things, industrial internet. Here's what I would tell the people watching your show.
A locomotive today is a rolling data center. An aircraft engine is a flying data center. This is producing terabytes of data every day. This data can be used to give back to customers, to drive fuel-efficiency, better performance, better environmental performance. We can take the same technology and do it in our plants. So, every investor of an industrial company ought to understand what their internet strategy is.
For us, it's going to be more productivity and faster growth. We've already been doing this for five years, so I think we have a leadership position. But Jim, I don't have to tell you, if you go back 15 years, trillions of dollars of wealth have been created in industrial internet stocks over the last 15 years. If you look out ten or 15 years, there's going to be trillions of dollars of wealth created in the industrial internet, and we're just in the first inning.
And I want GE to get its fair share of that. So, maybe we think of ourselves or people think of ourselves as an old industrial company. Those days are over. We think this is a place we can play. And we're participating in multiple ways. So, investors don't have to understand everything about it, but ask questions about it. But for us, higher margins, faster growth. Participate from a value standpoint the way that value is created on the consumer internet over the past five, ten, 15 years. We think this is possible for GE.
JIM CRAMER: Well, I think you're right. And I think the fact that it's the best-performing industrial in the world is certainly a testament to that. Jeff Immelt, Chairman, CEO of GE, great to see you, sir.
JEFF IMMELT: Jim, thanks.
JIM CRAMER: Thank you so much.
JEFF IMMELT: Good to see you again. Thank you.
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