GE Capital reorg focuses on growth, cost savings
In July, GE announced it was bringing together its financial services businesses under a common umbrella with the objectives of enhancing our ability to grow globally, better allocate capital, and reduce costs.
Today we announced a new GE Capital organization structure designed to execute on those objectives, and accelerate the evolution of the business into a more focused set of higher returning businesses. The new structure consists of operational poles in Europe, Asia and the Americas. We also have created two new platforms to take advantage of new opportunities and leverage our expertise: one for consumer-focused international banks and JVs, and another focused on optimizing returns on non-strategic assets. The new structure is effective January 1, 2009, and builds upon the company’s recent actions to strengthen our liquidity profile.
Michael A Neal, chairman of GE Capital, said, “Over the last two months, we have acted decisively to improve our funding position. We reduced our leverage, successfully raised capital, and accessed government programs that level the competitive playing field for us in financial services. Through these actions, we have strongly improved our 2009 funding outlook, and continue to reposition GE Capital for long-term performance and to play offense as conditions permit. This new organization aligns our operations with our strategic and funding plans.”
Led by a world-class team of GE Capital global professionals, this new organization will help us lower costs, operate efficiently and capture profitable, high-margin originations across key platforms and geographies today and as the global economic situation stabilizes and begins to recover.
With this more efficient organization, we are projecting approximately $2 billion in savings at GE Capital in 2009. These savings and the continued focus on optimizing the portfolio increase flexibility and vantage of opportunities created in the current market and drive value for our shareholders.
* View the new org chart.
Watch the video interview with Bill Cary, Chief Operating Officer of GE Capital. Communications Director, Marissa Moretti, asks the questions.
why hasn’t anything been done to stop the huge drop in ge stock price? when are the executives refunding their 2008 pay checks?
GE is a great company. I too wish that the management should have stock buy back plan which will boost the stock price. It is really scary to see ge stock less than $15.
Why hasn’t GE provided details of GE Capital’s loans that may be at risk? Of particular interest lately is auto industry loans and mortgage related loans. Assurances in those areas would stabilize the stock price.
There is no global enterprise company like the General Electric. Even its financial arm continues to be the most profitable company in 2008 when compared to the i-banks. Once the ‘gloom clouds’ go away, investors will realize the intrinsic worth of the GE model. GE is a steal at 15 bucks if you have a medium/long-term view !
Hi Ric,
Thanks for the feedback. We’re planning a post soon on just that topic. So keep an eye out!
Megan
GE
While I appreciate the recent announcement about the restructuring and the potential to save $2 billion in 2009, this level of communication is not sufficient to dispel concerns about the unit/company. Witness the share price decline below $13. GE must do more to disclose how it is truly managing this unit. Discussions on risk management policies is key. Please define GE’s guiding risk principles and numerical target ranges and publish them on your web site. Publish loan risk statistics by type and industry. More fully disclose Board and management actions in this area. Establish a Board risk management committee on a par with Audit. Demonstrate that you have realigned compensation with both short and longer term risk return targets. Raise the profile of the risk management office in GE Capital shown on that very simplistic org chart on this web site.
Below is an excerpt from the financial press which highlights the lack of transparency in the GE Capital as a reason for not buying the stock! This type of article is damaging for the company and will continue to reduce the company’s access to new longer term financing, either through debt or equity markets.
Please reconsider your financial reporting communications. The public is demanding more active action statements. My observation is most recently supported by the tough questioning of the auto industry executives who are being pressed for more detail on their business strategies and ability to match supply to demand and repay debt. What I have seen on this website does not even come close to what is really needed. What I call the reorg video provides no significant operating information and does not add to my comfort level regarding Mr. Neal’s management skills.
GE was once a great investment because it was a well diversified, well managed and focused industrial with a financing arm that supported the key growth businesses it had identified. Along the way, GE has lost its focus for the Capital arm and this entity became opportunistic in raising funds for supposed high return investment/finance opportunities in a wide variety of financial products. As far as I can tell, this move away from core financing support worked well and enhanced the bottom line when markets were strong as market liquidity and credit risks were obscured by the growth opportunities worldwide. Now as the housing market, the underlying linchpin collapses, this unit’s strategy is revealed to be the millstone that might drag down the whole company. I would like to see the company shed many of the tangentially related investment bank like strategies with their high capital/liquidity risk demands and return to the core financing arm philosophy. Develop a strategy to spin out the investment bank. If you could demonstrate that a return to core is the new approach in Mr. Immelt’s presentation in mid December and provide greater transparency for GE Capital, it might go a long way in supporting public investor confidence in the company and reinvigorate interest in its shares. It certainly would be easier to evaluate the simpler more transparent entity. Clearly the seeming mismatch between the industrial strategies and the investment bank like functions today truly challenge analysts, investigative financial reporters and investors alike. Fix this.
Thank you
J McCabe
ARTICLE EXCERPT:
Vitaliy Katsenelson, director of research for Investment Management Associates in Denver, says that the stock market has been "range-bound" for a long time, but that "we have gone from a cyclical bull into a cyclical bear" while staying within that range.
As such, he suggests that investors "not focus on the cyclical trends and try to focus on individual stocks. … The market is still not cheap, but there are a lot of cheap stocks. … This is a great environment for stockpickers."
During an interview with Chuck Jaffe, MarketWatch senior columnist, Katsenelson noted that many of the financial services stocks can’t be analyzed right now, which should frighten most investors away because "if you can’t analyze a stock, you basically become a speculator."
With that in mind, Katsenelson – the author of "Active Value Investing" — put a sell recommendation on Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC) and Citigroup (C) .
He noted that American Express Co. (AXP) is one of the few financials he believes can be easily analyzed, and he suggested that it’s a long-term buy, although the price may get worse before any long-term rebound begins. He said that the financial services business at General Electric Co. (GE) is sufficiently hard to analyze. While other aspects of the conglomerate may be promising, he said he’d still avoid the stock.
I have retired from the Co.after working working alnmost 35 years
I worked in what is presently Energy Department in application Engeeneering, Project proposal assembly and cost estimating.
We worked closly with the Financial people and looked to them to help with external customers.
It looks like presently each section of the Co. is free runing and some Hq. scrutany is required for the overall good of GE.
We must fix it as we sure going down hill.
Gene Hersh
Ready to replace Bill Cary as COO of GE capital so he can focus on money.
Arthur Mboue, Jd MBA
I’ve maintained a long term outlook on GE stock since 2000, like what the Chairman has said we should. The stock has gone from $50 to $15.
Transparency is like the membrane in the reverse osmosis process of funding. GE capital’s trade off is between gaining investor confidence or investor delight. Mr . Chairman and CEO wants the era of professional management dead, which may improve the mismatch described by J McCabe.