Transcript

Finding opportunity in volatility, with GE Vernova CEO Scott Strazik

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1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. We're not gonna uh suck our thumb and cry on our beer as things kinda change. You know, we wanna use change as an opportunity to improve. Now...

1:44 Tariffs can create cost challenges. We're not immune to that certainly in the near term, but again. Is that something that we're gonna be stuck in the mud over? You know, even in the last five days, there's some warnings that we'll be able to use to our benefit from here. That's Scott Straysk, CEO of GE Vernova, the energy arm of GE that spun out as its own company a year ago. Scott was initially a guest on this show last year, and I wanted to talk with him again to hear how he's managing amid the Trump administration's tariffs. and the rejugling of global trade.

2:32 G. Evernova had a tremendous 2024 among the top performing stocks for the year, but Scott knows he needs to look forward, not back. We dig into real-time adjustments and steadfast convictions, including how the shifting conversation on climate change. It's his planning, his perspective on leadership and on our evolving energy needs is instructive, so let's get to it. I'm Bob Safian, and this is rapid response.

3:05 I'm Bob Safe. I'm here with Scott Strazy, CEO of Global Energy Company GE Vernova. Scott, welcome back to the show. Bob, thanks for having me. I appreciate the opportunity to connect with you today. Yeah. GE Vernova is now one year into life as an independent public company. Much to celebrate. Your revenue rose to thirty-five billion dollars in 2024. Gee Vernova was the year's fourth best performing stock. Uh again, a lot to celebrate.

3:33 But in twenty twenty five, the external environment hasn't been as friendly. The Trump tariffs have everyone scrambling. Like uh how do you think about This moment, how do you think about it compared to a year ago at this time? Well, uh you know, our end markets really haven't changed very much, Bob. I would start there. I mean we continue to see very strong end markets and our larger core businesses and gas power and our electrification and grid businesses. So Frankly, you know, there's gonna be moments of dislocation between the stock market and

4:09 R N markets. It doesn't mean that depending on where the tariffs go, that doesn't create an opportunity for us to prove out our nimbleness and managing our global supply chain, and we're gonna have to do that. But uh I think it's frankly an opportunity of for us to demonstrate. How much we've grown in our first year as a public company to be able to operate in this kind of environment. So you mentioned the agility that you have and it and it's gonna be under

4:36 Test I guess with this with sort of the the tariffs. How did the tariffs Practically Impact. Your business. I mean, you're a global business. So changes in global r relationships and reputation.

4:50 All of that r requires some adjustment. Yeah, I think w even if you take a step back and think about some of the stuff I've talked to our investors about on where we want to make investments. We want to invest in our business where we can improve the durability or the the resiliency of our supply chain. And that's simply because we have a lot of organic growth that's coming in our businesses. Irrespective of any policy changes. Now

5:19 Policies are gonna change, they're gonna evolve. This is gonna force us to relook at where we source certain things. It'll force us to revisit our terms with some of our suppliers in different locations, but we know how to do that. So we don't wanna be too uh fast to respond as we're kind of trying to make sense of everything, but I'd also rather be a company that is uh quick on its feet.

5:43 In this environment. President Trump announced the tariffs on a Wednesday afternoon after the market closed. Rest assured, you know, by Friday afternoon our teams were actively working evaluation plans of what our alternatives are. Now It doesn't mean within forty eight hours you pull the trigger in a dynamic period of time.

6:05 So we're working it pretty hard right now to figure out what our alternatives are and With a growing backlog to the extent. our backlog is uh is growing so substantially That also puts us in a privileged position with our supply base to come and say, listen, this is what it's gonna take. To keep serving G E Vernova.

6:25 It's it's almost like there's been a pullback around the very idea of globalization, that like maybe it's not good to be a global organization. Do you Think about that. Well, when I think about my first four months of the year, I mean I my first trip of the year was to Singapore and Japan the first week of January. Um, I had a great trip in uh the Middle East in February, visiting Saudi Qatar.

6:55 Dubai, Abu Dhabi, these are all important markets for us. You know, I think we've got opportunities to serve these markets. throughout and we're gonna work really hard to earn those opportunities. At the same time, long before Announcements with tariffs. The reality is

7:13 There has been an evolving shift with globalization. There's certainly been a lot of strategic moves towards concepts of decoupling from the Chinese supply chain. Explicitly. So we've been working that over a long period of time. Now The last week certainly has been broader than uh any one country, and with it it forces you to really re revisit in an even more intimate way what you do and where you do it. But we can do that.

7:43 We're capable of taking that on, and uh I'm highly confident we can use this moment. To make ourselves a better company for the long term. Mm-hmm. You recently launched um the company's first global ad campaign, The Energy of Change, around this idea that it's a time of opportunity in the energy sector. Why that messaging now? Does that Change it all given the tariffs, or that remains as as strong as it ever was? I think even more so, this is very much about bringing a new energy to the energy transition.

8:15 And the reality is when it comes to Climate change as an example. There's a lot of people that go at that conversation with a somber, negative, pessimistic tone. That we reject inside GE Vernovo. Think about the hyperscalers as an example that care deeply about sustainability. They need more electricity. They're gonna help us move decarbonization technologies left, like nuclear, like carbon capture, that

8:44 otherwise wouldn't uh be there. I would make that same argument, although it may not have been the intent of our first global campaign that We're trying to bring the right energy to this conversation of globalization too. So you think about India. most populated country in the world today.

9:02 It's still getting eighty percent of its electricity from coal. That's an incredible opportunity for us to serve that market. I was in Saudi in February. They're still getting forty percent of their electricity from oil. They want to get to fifty percent gas, fifty percent renewables by twenty thirty. We can serve that market. So I think there's real opportunities for us to accomplish substantive things in the near term, both on decarbonization, but

9:30 being a leading global company. Mm I mean, you and I were on stage together at the Climate Conference last June and you you talked some about your your vision of sort of modernizing the US energy system, energy elsewhere. Climate change seems to be A topic that's kind of less in vogue, maybe, right now, than it was then? Does that shift your priorities, your your plans, or No, you're still committed. That is a a priority for you.

10:00 When we talk about sustainability, we very much talk about it in the context of Electrification. And then decarbonization. And in that vein, it's how do we add more electrons to the world every day while making the average carbon intensity of those electrons cleaner. That's been our guiding true north for over a year. It remains our true north. We do think it's Very important that we add the electrons.

10:29 But we see a lot of ways to decarbonize them as we go. So I think we remain just as committed today as we were yesterday. And no, I don't see that really changing for us. Hm. And when it comes to say like wind energy, G Vernover supplied

10:46 Half the turbines for the largest wind farm project in the Western hemisphere, Sunziest five billion dollar project in New Mexico. President Trump has sort of Bashed wind turbines as eyesores that harm wildlife. Like does that sort of Government I don't know, resistance. Impact. Where you deploy your effort to the b as a business.

11:07 Well, I was in Pensacola, Florida last week, which is one of the locations where we make our nacelles uh for the wind turbines where all of the electrical equipment and generators are stored at the top of the wind turbine. And this is a facility we've been continuing to invest in, and uh it's about seven hundred employees, about twenty percent are veterans. We're excited about where we're going with wind. If I give you an example of something that From an innovation perspective that's really changed in the last year, we're at a point now with our Wind blade technology.

11:43 That every blade we manufacture we use a crawler. that crawls through the inside of the blade and takes visual images That we're now leveraging with artificial intelligence to strengthen the quality. Овар блейд маніфактрун про це. I use that example to just say we're in this business and we're investing into it. Now

12:06 At the moment, truth be told, our North America wind orders are soft. We expect them to be soft the first half of the year as our M customers um get more clarity on US policy as it relates to wind. But we see a role for wind to play and we're gonna be very well positioned to serve that market. Hm. You mentioned the use of AI in your in your wind blades and uh you know

12:31 AI requires a lot of energy. Uh G Vernover in some ways has almost been swept up in some of the AI enthusiasm, almost AI adjacent, right? Do you worry about uh like an AI bubble or what happens in that industry impacting you? Well, I think the AI demand cycle is still a small proportion of our overall in markets, so there's a lot else going on here. You have just the Development of uh reindustrialization of the US with manufacturing For a long time, as we were driving the most efficient global supply chain. That may have been

13:11 Weighing down electric load growth in places like North America and Western Europe. And driving more load growth than China with coal. As an example. As some of that decoupling takes place, it requires more supply chain growth and more locations, and those need electrons. There's a lot of reasons why we're going into a period of time here that we see

13:36 Uh electric demand growth. being substantial. I analogize that back towards In the case of the US and Western Ura, more like after World War Two. Nineteen forty five is the right baseline comparison point on

13:51 How much more electricity is gonna be needed. AI's part of that, but it's it's uh one of many drivers. If there is a an influx of more manufacturing in the US, which obviously the the administration wants, all of that manufacturing requires energy to be able to operate. And that that That is opportunity and growth for for you because the system needs more capacity.

14:15 Exactly. You have uh announced investing six hundred million dollars in US factories yourself, creating over fifteen hundred jobs. How how much Does GE Vernova need to be An American company? I would say more we need to be a local company for our local markets. I think in your bigger markets, you're gonna have a local supply chain to serve that market, local teams to serve that market.

14:43 We're a global company. Where at this moment one of our most important local markets certainly is the US, and that's why we're investing into that market. But we're not gonna not invest in some of these other countries that are attractive and markets too to be local there. There been some

15:03 speculation that the speed with which uh US manufacturing can ramp up to replace things that might have come from abroad, that that's gonna take a while and there's gonna be disruption. Is that something for your business that you see that you that you worry about, or is that Part of the nimbleness, I guess, that you're talking about. On the part of your team. We do have a fair amount of industrial footprint in the US that allows us to build on existing assets. So

15:33 The six hundred million dollar investment is reinvesting in existing assets, fifteen hundred jobs to locations that already have the Concrete poured. They already have the cranes. They already have the logistics with the railroad adjacent to the factory.

15:52 So we can move reasonably quickly. Now To the extent the policy environment drives us towards greenfield investments to re industrialize parts of our supply chain. That would take longer, um, truth be told. And that's a multi-year journey that at this point we aren't necessarily Um Evaluating.

16:13 But we will keep looking in that regard, but first and foremost, we're gonna keep trying to eliminate waste in our existing processes. And build upon the assets we have and We feel like that can carry us for a period of time now. Where we don't have it as an example, you know, we announced and closed an acquisition of uh supply chain footprint um from Woodward. That was a vertical supply chain integration of

16:39 A small part of Woodward's business, but for our gas business. An important part of our supply chain where we thought it made more sense to just have that. Internal. How much do you tune your sort of long term decision making when there's

16:55 You know, noise and change and pressure in the near term. We need to scrutinize How long the status quo is the status quo. For sure. And that that can be hard to do. And uh in a volatile moment that we're in. But

17:09 If nothing else, it gives us a chance to really challenge ourselves on what we have been doing. Well, there's a different way to do it. And That's the way we talk about it internally is This is an opportunity for us to really Revisit Past assumptions and think about how we can be better now.

17:28 In some cases we may gain conviction with exactly the play we've been running. In others. There may be a better alternative. Mm. I mean do you have sort of

17:38 I don't know, leadership principles or lessons that you use as a as a touchstone when things do get volatile. Well, we're not gonna uh Suck our thumbs and cry on our beer as things kinda change. You know, we wanna use change as an opportunity to improve. In that regard. This moment when we're just reaching our one year anniversary as a public company is a moment when

18:03 I feel pretty confident we've got our feet on the ground. And we can play into this and uh use this moment of change to play offense on not just how we want twenty twenty five to go, because We won't change twenty twenty five in any material way, certainly from a supply chain strategy. But we can use twenty twenty five to challenge ourselves for the next Decade.

18:28 And that's very much what we're doing. Got is somehow both steady and fiery. He's looking for opportunity at a moment when many other CEOs are paralyzed by uncertainty. So how does he avoid falling into the uncertainty trap? We'll talk about that after the break.

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19:35 Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford's CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search Rapid Response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Before the break, GE Vernova Scott Strayic explained how he's looking for opportunity amid the tariff war.

20:19 Now he explains how he stays optimistic in the face of challenges, plus talks about nuclear power growth, GE Vernova's new alliance with MIT, and more. Let's jump back in. I wanted to ask you about Nuclear power. Yes. You know, the tech sector's been part of a revival of interest in nuclear power. Has investment been as robust as sort of the news cycle about it?

20:45 Well the Conversation is accelerating. I would say there's urgent diligence happening with the end customers, the spending. we're early in that phase. So what you're seeing is spend on um trying to get incremental uh megawatts out of existing plants. We've got an ability to what we

21:07 Call up right. Existing plants. This Decade. And that that's starting to move, but I would say a new build.

21:16 Um we're just in urgent diligence. So the spend isn't happening yet. We're helping The end customers were helping the administration understand how we move this industry to the left and get innovation cut in by early in the next decade. We're in construction on our first Small modular reactor in Canada right now. We actually received the license to construct last Friday in Ontario. And now the goal is how do we get that license to construct

21:46 In the United States as quickly as possible so we can get Building some here. And how much of the I don't know, the delay or the slowness of the commitment. It is about sort of past nuclear power. concerns and disasters impacting the choice and progress, or is it more about

22:04 Cost Yeah, I I would say infrastructure doesn't get built on style points. It's ultimately economics. And this is uh we're gonna be early in the serial number build out and that's the economics to build a small modular reactor, but for the end customers, their business case. Is very dependent on when the electrons can show up. How quickly can the uh NRC, the regulatory body in the US, provide a license to construct?

22:33 How quickly will it be able to provide a license to operate the plant? We're getting closer and closer to a tipping point. where a number of these projects are gonna go through the regulatory process and we're gonna be we're gonna be building them here the second half of this decade by early into the next decade A number of these will be creating

22:54 Clean electrons in the US. You mentioned the regulatory agency. Lots of businesses that w work with the US government. Are uneasy about you know, crimping that relationship. I know we've seen big law firms preemptively make deals with the administration. How much

23:12 Do you worry about that? How much do you focus on what your relationship is with The administration and the government? Well, I can tell you certainly on our end, um, as an example, Secretary Wright, Department of Energy, Secretary Bergum with Interior have been very accessible to myself and my team as we've been iterating on how we serve them and this administration so

23:37 I'm encouraged that we can work through these things and that we'll accomplish that. Mm-hmm. Your headquarters are based in Cambridge, Massachusetts. It's something we talked about in part because you wanted to be near the universities in the area. Many of those universities now face a pullback or potential fullback in federal funding for research. GE Vernova recently launched a partnership with MIT committed I think fifty million dollars is is that partnership an effort to fill that funding gap? We've been talking with MIT for the better part of eighteen months on this align l alliance. Having spent a lot of time on the campus myself, it's walking distance a couple blocks away. There's an incredible amount of both technical and policy enthusiasm.

24:23 on how to practically move the needle on technology that can electrify and decarbonize the world. So We're pretty excited about this. We're gonna have about twelve research projects every year we're gonna work on. Well we're gonna match uh masters and phd students with our

24:44 uh PHD researchers at our Advanced Research Center and to work on projects together. We're gonna pick three policy topics every year that we want to work on and bring our teams together to the G E Vernova MIT Uh think tank to kinda put positions in the ground on how we can

25:04 Help governments think about poly. We're gonna hire a lot of interns during the summer and bring them into the mix of G. E. Vernova. So I'm really e excited about the MIT Alliance, and uh I think it's one of Many things will do. I mean when you think about The number of STEM graduates we need.

25:24 In the US to meet this growth we've talked about and reindustrializing the US. We'll also look for opportunities to be involved in STEM programs throughout the country, maybe more community college oriented in different ways close to some of our epicentres of uh of our larger factories so MIT's a start, but

25:47 We're gonna keep in investing in this space generally because We feel like we we can play an important role in this ecosystem. The Funding cutbacks have hurt a lot of research projects. Do you feel like

26:01 There's more of a opportunity, obligation as a business person to sort of fill those gaps I mean it it it's it obviously it's not all all gonna be you filling the gap of all the money that the that the government w was putting towards these things, but it it does potentially slow some of the research that You know, is valuable for you. China graduates three and a half million STEM graduates every year. That's about as many graduates as we graduate across all disciplines every year.

26:33 So this is important. You know, we need to keep investing in science, technology, math, engineering. Some of that's undergrad, some of that can be community college, some of it can be PhD level stuff, which is a little bit more oriented towards the MIT alliance. We're gonna be involved in all the above. And We do that because We want the communities that we're in MIT as a neighbor to thrive.

27:00 But we do it because we think it's good business. We're only gonna grow our company and serve these markets with The best team in the world. And to do that, you got to invest in in people and Sometimes the best way to get the people Is to be part of an ecosystem that allows them to get to know you.

27:19 And iterate together, and that's what we're all about. G Vernova has What seventy five thousand employees all over the world. What we say to them about This moment

27:34 for the company this moment given this economic global war that's kind of going on. Like H how do you Calm them, give them perspective. Well, we've been talking about this moment as an investment super cycle into the electric grid for the better part of eighteen months now. And there's nothing in the headlines that give me any less conviction in the market opportunity presenting itself.

28:01 More electrons are gonna be needed. Especially in a decoupled supply chain where There's gonna be more redundancy, maybe built into the global supply chain because of policy. So our opportunity to serve these markets is as strong as ever.

28:19 Now. Tariffs can create cost challenges. We're not immune to that, certainly in the near term, but again Is that something that we're gonna be stuck in the mud over or are we gonna act on it? and at least challenge ourselves every day and use this moment to become an A better company.

28:36 We've had a good first year. As a public company. But it's just the beginning. And we have to use this moment to challenge ourselves to be that much better a company, and that's what our expectation is and that's

28:50 The way I talk to our teams today, and it's the way I'm gonna talk to them tomorrow because There'll be other variability and volatility that the world and the markets create. The world needs GE Vernova. So if we're gonna serve this market, we're gonna do it with a little bit of gritty resilience.

29:10 And practical optimism every day that the world needs. I mean, I I I you know, I could see someone in your shoes being like, All right. I I managed the spin off from GE.

29:24 We had a great first year, everything's going well, and then oh, I gotta deal with this hassle of all this external stuff. Like it like it would be, uh, really? Now No, Bob, I've got a kick in my step right now. I like our chances, but I think uh volatility creates opportunity to even further differentiate ourselves. That doesn't mean it's easy. It doesn't mean we don't have our challenges. We will have moments here, depending on where the tariffs go, that we will incur incremental costs. But um you don't win a game when um consistently when the ball always bounces your way. You know, you've gotta kinda be ready to respond to the environment we're in.

30:08 We're gonna have moments like this. We're in the beginning of year two. Um I like our chances to respond to it and be better because of it. And it's also a great opportunity for me to see how my team responds. Right, and it's easy in a first year or easier.

30:25 In a first year when we're reasonably popular, I'll say in quotation marks on how we performed. For everybody to be in. Now's the moment to really say, Okay Who really is leading with what we call a we culture.

30:41 of open palms towards how do I help? Versus what we try to avoid, which is a U culture of finger pointing. And that's in both Internally But also how we interact with the outside world. I mean, I try to always put myself in

30:56 the counterparty shoes and then find a way to go with open palms versus finger pointing. And that's that's Gonna be the way we run this company. Do you Find it hard ever to stay optimistic? Are there things that you do? I mean, your your team calls you relentlessly optimistic.

31:14 This is a privilege w the opportunity we have right now. I have the luxury of a board A management team that wakes up every day focused on leading the energy transition forward and I think that focus that we have today as uh as a purpose built public company Is very well suited for the volatility of today.

31:36 It doesn't mean we won't have our challenges. By no means are we immune to tariffs. That is not what I'm saying. I'm just saying that, um that we're gonna take advantage of those challenges and I'm determined we can do that. And uh And look forward to showing you those results over time. Well, Scott, this has been great. Thank you so much for doing it. Bob, thank you for having me. I appreciate it. I look forward to more interactions from here, okay?

32:03 Scott has a way of making me feel more optimistic, despite all my concerns. He's not denying the challenges ahead, but he's not letting them slow him down either. I'm struck by how he's sticking to his principles. Despite changes in the macro environment, he's not backing away from climate change and decarbonization or from global projects that may get more complicated with tariffs. Of course, those choices are good for GE Vernova's business, too. But still, it's nice to talk with a CEO who's not rewriting his playbook to appease anyone. He's not picking any fights, but by holding to his perspective, that sends a message too.

32:45 I'm Bob Saphian. Thanks for listening. Rapid response is a wait what original. I'm Bob Safian. Our executive producer is Eve Tro. Our producer is Alex Morris. Associate producer is Mashimaku Tonina. Mixing and Mastering by Aaron Bastanelli.

33:15 Our theme music is by Ryan Holiday. Our head of podcasts is Le Tal Malad. For more, visit rapidresponsshow.com.