With protectionism heating up around the world, GE is adopting a strategy of localization. It’s building plants and facilities in places it never otherwise would in order to avoid protectionism. Can this strategy work long term? Ted Mann and Brian Spegele write in the Wall Street Journal:
In India, GE began to push harder on localization after Prime Minister Narendra Modi was elected in 2014 on a “Make in India” platform. He promised economic development fueled by major investments in India’s infrastructure.
GE says it wouldn’t have won its India locomotive deal in 2015 without first expanding in India four years earlier, when it started building a factory complex in the industrial city of Pune. That helped GE train a cadre of skilled workers in an automated facility, which is expected to produce about 30% of the components in the locomotives to be assembled in Marhaura.
Selling new locomotives to Indian Railways, the government-controlled operator of its vast train network, has long ranked high on GE’s agenda. But GE wouldn’t make some major investments in India, in part because it worried about Indian bureaucratic inefficiency and political corruption.
In the end, GE decided it had no other option. A former railway minister who hailed from Bihar picked the engine production site in the late 2000s to spur economic development, executives say.
The $2.5 billion order for 1,000 locomotives over 11 years is one of the largest deals ever for GE’s transportation unit, and its biggest order ever in India.
The company hedged its risk by agreeing with Indian Railways to build the factory as a joint venture, including a $15 million investment from the Indian partner. The plant, which will employ about 400 workers, is slated to begin assembling locomotives late next year.
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