This was in response to the question: You’ve invested hundreds of millions in the R&D labs at GE, but there’s more to it than just putting more money into it. What have you done to get more revenues?
Three things…Our global research center in Schenectady looked lousy. The physical plant, the amount of customers who came through every year – we’d just fallen behind. It’s one of our best assets. So the first thing we did is just fix that physical plant to give it the look of a winner. Then we globalized it and opened up centers in Bangalore and Shanghai and Munich.
Third, we had a high-priced job shop. We had more than 2,000 projects being done in that infrastructure. I cut it to 80. I went and said, Molecular medicine – we’re going to own it. Nanotechnology – we’re going to own it. Renewable energy, energy efficiency, environmental technology – we’re going to own it.
GE’s total research and development expenditures were $3.4 billion in 2005, compared with $3.1 billion and $2.7 billion in 2004 and 2003, respectively. In 2005, expenditures from GE’s own funds were $2.7 billion compared with $2.4 billion in 2004. Expenditures funded by customers (mainly the U.S. government) were $0.7 billion and $0.6 billion in 2005 and 2004, respectively.
Expenditures reported above reflect the definition of research and development required by U.S. generally accepted accounting principles. For operating and management purposes, we consider amounts spent on product and services technology to include our reported research and development expenditures, but also amounts for improving our existing products and services, and the productivity of our plant, equipment and processes. On this basis, our technology expenditures in 2005 were $5.2 billion.
So GE is spending in the range of a few hundred million and maybe a billion dollars on nanotechnology and molecular medicine.