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Could Cincinnati lure GE headquarters from Boston?

Why GE's Larry Culp might choose Cincinnati
Banks sale brings $4 million payday to city, county
Posted at 8:48 AM, Nov 10, 2021
and last updated 2021-11-17 17:45:54-05

CINCINNATI — GE Aviation answered yesterday’s question of the day by explaining there is “no anticipated impact to facilities or employees” from the split of General Electric Co. into three separate companies.

But here’s a question of greater importance: Would Larry Culp like to live in Cincinnati?

“Might be wishful thinking, I don’t know,” said Matt Stith, portfolio manager and director of equity research for Bartlett Wealth Management.

Culp is the architect of GE’s breakup strategy and will remain CEO after its health care and energy units are spun off as new publicly traded companies. That leaves its Evendale-based jet engine division as the core of a new company, headquartered in Boston since 2016.

Would it be too much to ask for Culp, a Red Sox fan since childhood, to move the HQ here?

“It’s always tough when you get the East Coasters and try to move them to the Midwest, but maybe,” Stith said. “Cost of living, quality of life is certainly a lot better, I think, here than on the East Coast. But that could possibly happen. Maybe there is a consolidation and Cincinnati becomes the headquarters to that piece.”

GE declined to comment on where the post-restructuring enterprise will be based, but offered this statement:

“GE Aviation is proud of our history in the Tri-State area. Our operations here are critical to our success, and we remain strongly committed to Cincinnati.”

Ohio Governor Mike DeWine is ready to make it happen.

“This is a home of GE and has been for many years, so we're hopeful,” DeWine said yesterday. “We're poised to do whatever we need to do to bring more jobs here to Ohio.”

If it moved here, GE would be the region’s third-largest Fortune 500 company, based on its 2020 revenue of $22 billion. It would also cement the region’s status as an aerospace hub, with 9,000 of GE Aviation’s total work force of 40,000 people.

“We're really the aviation state,” DeWine said. “GE has played a major part in what we're doing in aerospace and so we're very optimistic.”

GE already has space available on the Cincinnati riverfront, where its global operations center opened in 2016. Built to house more than 2,000 employees, the Class-A office building at the Banks was home to 1,134 employees in 2020, said Cincinnati spokeswoman Holly Stutz.

GE signed a 15-year lease for the building with two 25-year extensions possible. It also has a Job Creation Tax Credit that could be worth millions to GE if it boosts employment at the Banks.

“Under the JCTC agreement, GE was to create 1800 jobs at the Banks,” Stutz explained. “They have not attained this number of employees at any point during the agreement and as a result have not claimed any tax credit under the JCTC.”

The 10-story office building would be easily adaptable for headquarters use, as it was designed to accommodate collaboration between employees in finance, human resources, information technology, legal and supply chain roles.

But the center was built to serve a far-flung empire that no longer exists. GE has been selling off divisions for years. When it completes yesterday’s announced restructuring in 2024, it will no longer function as a conglomerate.

“To be hopeful and optimistic, you hope GE will repurpose that into some sort of use,” Stith said, “whether they support aviation or whether they still can support their other businesses.”

But even if Cincinnati doesn’t snag the headquarters, few expect GE to downsize its manufacturing and research enterprise in the rest of Southwest Ohio.

“Certainly, there’s risk to any restructuring of large organizations such as General Electric, but to the degree that the focus and the strategy remains aviation, at this point we don’t see any risk to jobs here locally,” said Kevin Gade, portfolio manager at Bahl & Gaynor Investment Counsel.

Stith said GE’s Ohio footprint is too big to duplicate elsewhere.

And it might be too specialized to replicate, based on testimony delivered in the "Chinese spy" trial of Xu Yanjun, an intelligence officer convicted Nov. 5 of plotting to steal trade secrets from GE.

“We are the world leader,” testified Nick Kray, chief consulting engineer for composite design at GE Aviation.

Kray said no other company has achieved GE's composite fan blade and fan container system technology. Competitors build engines out of metals such as titanium, which are heavier and can crack. Composites have better durability than metallics and are the most weight-efficient.

“The more I can take weight out of the engine, the lighter it becomes,” which means airplanes can have more passengers, more seats and go a further distance.

It took GE 10 to 15 years to develop the first composite fan blades, which were first used by Boeing in 1995.

That makes Evendale Mayor Richard Finan think GE can't leave his village.

“They can’t skimp on the engineering,” said Finan, a former Ohio Senate President. “You have to keep producing engines that are quieter, more fuel-efficient and faster. And that takes technology to do that. And I think that’s going to stay here.”

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