Would You Like Technology With That?

Rob posted yesterday about Jeff Immelt’s comments in BusinessWeek. He took the typical GE line and said we should all embrace globalization. The comments seem to coincide with the article in yesterday’s WSJ about GE and their recent power-generation deal in China. Here is the first four paragraphs of the article:

In his two decades pursuing contracts in China for General Electric Co., Delbert Williamson’s strategy was always simple: Sell the most power equipment at the best price.

But by the time Mr. Williamson sat down at a banquet at the historic Diaoyutai State Guesthouse in Beijing last March, to celebrate the award of a $900 million contract for high-tech electricity-generation turbines, the formula for GE’s success in China had changed dramatically.

In addition to offering a competitive price, Mr. Williamson had to agree to share sophisticated GE technology with two Chinese companies that wanted to eventually make the equipment themselves.

Mr. Williamson, then GE’s president of global sales, was reluctant to open his company’s technology vault. But GE had little choice. To be considered in the bidding for equipment contracts totaling several billion dollars, GE and its competitors were required to form joint ventures with the state-owned Chinese power companies. GE was also required to transfer to their new partners technology and advanced manufacturing guidelines for its “9F” turbine, which GE had spent more than a half billion dollars to develop.

I am appalled by the idea that to play in the Chinese market you have to give them the technology for what you are going to sell. While they are at it, I think they should ask for a complete customer list. Can someone give me another example of anything like this?

I can already hear the opposing arguments.

“If we didn’t, someone else would.” As a GE shareholder, I think it may have been in the company’s best interest to pass on this deal.

“We will continue to innovate and make even better products.” That is great, but you have just given the Chinese a pass on the last 100 years of industrial evolution.

The Chinese have the long view. They are not thinking about the equipment they are buying now. They are thinking about the turbines they are going to be building 20 years from now. They are thinking about how applicable turbine technology is to jet engines. Boeing has Chinese partners building pieces of planes now. The complete planes is not far behind.

What will they ask for next?

[I want to thank Mr. Foster calling out the WSJ article in businesspundit’s comments. I missed the WSJ yesterday and would have missed the article altogether.]