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"rhymes_a_little_bit_with_Avio if I think about vertical integration."

GE spelled out some of the plans for the growth of their additive business. Some of this was done during General Electric's Additive Manufacturing Investor Meeting on September 6, 2016.
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Additive Manufacturing Investor Meeting Audio Recording mp3 25.05MB

The nuances of the discussion were notable by listening to the mp3 in addition to reading the transcript. If you have the time I recommend doing both. The presentation is approximately 55 minutes.

From pages 16 and 17 of the transcript:

Jeff Sprague - Vertical Research Partners - Analyst

Thank you. Good morning everyone.

So just thinking about this little bit back to the question of make versus buy, there is also I guess an element here of vertical integration. There's a very important external story you talked about, but this at least rhymes a little bit with Avio if I think about vertical integration.

Could you speak to that question more broadly? Do you see the Company moving towards a more vertically integrated model over time?

And then the second part of the question really is just back to the make versus buy. Given the amount of investment you have made in this area over the last 10 years or so, was there some particular technical hurdle that you couldn't get over organically that drove you to do these deals or is it just a timeline/acceleration strategy?
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Jeff Immelt - General Electric Company - Chairman & CEO

A couple of questions in there, Jeff. Why don't I maybe start, and then I would say that basically all the businesses that we're in content matters.

We're always going to need suppliers but in places where we think we have very specific expertise and competitive advantage, those are places that as time goes on we think about making versus buying. In this particular case, I would say, Jeff, we saw a great chance for a vertical business as we went through it and we've spent a lot of time looking at this and assessing it.

So in addition to just purely thinking about backward integration, we saw a way in many ways to create a very good market space for us going forward with a lot of competitive advantage because of the work Vic and his team have done over time. Avio, of course, we've got a pretty good experience with that. And then I would say that speed to market in doing these two acquisitions I think gave us platforms and teams that we thought would be extremely valuable going forward, that we can add to.

So I think this is a way, Jeff, to give us some acceleration and expertise in a way that basically I think is an investor-friendly way that will accelerate our efforts. And that's I think how we looked at these acquisitions. I don't know, guys, if you would add to that.
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Vic Abate - General Electric Company - SVP & Chief Technology Officer

Just a couple of thoughts there. The use cases that we were seeing were outpacing the pace of the industry. So when you actually look at lot of the equipment that we were applying to the industrialization of that the modifications we were pushing research at a fast pace to keep up with the use cases.

So these acquisitions really put us in a position to take all roads for the lead through the machine as far as the implementation and the adoption. So we're able to take very fast-changing derivatives of fundamental technologies, get them into an industrialized package and then implement them where we can use them across the Company to scale faster.
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David Joyce - General Electric Company - SVP & President and CEO, GE Aviation

Jeff, I'd just like to say relative to Arcam and SLM we looked really carefully at the landscape of all the available companies in order to accelerate it. And we determined on multiple fronts that these two had very complementary technologies that fit very well into our profile.

And we had experience with both of them, working Arcam in Italy on low-pressure turbine blades and titanium aluminide as we speak, on the 9X which has been and continues to be a very positive experience, and SLM we're doing some very advanced research with their machines because of the open architecture on which they are designed. So in both cases it's a very determined decision that we want to go after SLM and Arcam.

And my hat is off to those two teams. The leadership is terrific and the teams have done a great job of establishing themselves and their technologies in the marketplace to where a Company like us can advance it even faster.
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Jeff Immelt - General Electric Company - Chairman & CEO

But I would just, for investors I would say look, we do this, we have a pipeline of ideas that are going to go, I think this allows us to accelerate behind this. We've got a bunch of other ideas in terms of how to accelerate, how to lead, how to build good customer presence and things like that.



Other quotes from the transcript:

Jeff Immelt - General Electric Company - Chairman & CEO

We leverage our enterprise strengths: data created by R&D scale, a common global footprint, service technology, Predix, financing and culture. And we're moving from strength to strength as we build positions in industrial analytics and now in additive manufacturing. These represent foundational capabilities for industrial companies in the future.

Through our investments we're creating horizontal capabilities and vertical businesses. And by doing so we're driving productivity for GE, our customers and the industrial world.

We view additive manufacturing as transformative technology to expand product design, flexibility and promote speed. It facilitates the manufacturing of highly valued parts. It can dramatically improve service delivery and asset management.
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David Joyce - General Electric Company - SVP & President and CEO, GE Aviation

Here are the economics. We are buying both SLM and Arcam for approximately $1.4 billion. We expect together we will achieve 40% CAGR over 10 years.
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Jeff Immelt - General Electric Company - Chairman & CEO

We view additive manufacturing as transformative technology to expand product design, flexibility and promote speed. It facilitates the manufacturing of highly valued parts. It can dramatically improve service delivery and asset management.
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David Joyce - General Electric Company - SVP & President and CEO, GE Aviation

We've been on a journey of discovery with additive technology for quite some time at GE and it accelerated significantly after we bought Morris and RQM in 2012. Since then we've become more convinced at the transformational opportunity that additive brings based on our own proof points.
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Additive changes the game because it changes the paradigm between the cost of manufacturing and the complexity of design. Designers can optimize for performance and productivity with new and better cost entitlements and faster cycles.

We are using additive in a LEAP engine today and our assessment over the life of the LEAP production is that additive can yield a 25% to 30% additional reduction in product cost entitlement and a 25% reduction in lifecycle cost and service. In our Advanced Turboprop Engine we've eliminated 845 parts in design incorporating additive. This represents an elimination of thousands of machining features and inspections and hundreds of quality plans and procurement contracts.

As I stated this productivity can be transformational. This next page uses a turbine frame assembly in one of our jet engine development programs as an example of the enterprise productivity. Incorporating additive manufacturing the frame assembly can be created in one design file produced by eight engineers, manufactured and inspected using one additive machine and will be repaired at one source with access to all design and manufacturing information linked through Predix.

Now compare that to today's conventional assembly, managed through 40 disparate data systems, 300 individual parts designed by 60 engineers and manufactured at over 50 sources, and in service sent out to five sources for repair. We believe this turbine frame assembly story is a good proxy for the future of digital industrial manufacturing.
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Jeff Immelt - General Electric Company - Chairman & CEO

To recap, we plan to enter the market for additive manufacturing equipment sales, materials, service and production. We will serve the entire market including internal demands and we believe that this is transformative technology which expands product design and service productivity. It's a perfect fit for the GE Store and a great return for investors and we plan to lead.