GE responds to investor concerns

March 4, 2009

Recently claims have been made that GE will be required to raise new capital near term. This is pure speculation, is inaccurate and is not based on any input from our company. GE has acted aggressively during the current global economic crisis to strengthen our capital base and significantly increase sources of liquidity at GE Capital. GE has a balanced portfolio of businesses and broadly diversified assets in terms of class, customer and geographic distribution. We are well positioned to weather this downturn.

Below are facts that address this recent speculation directly:

GE has a stronger capital position with ample liquidity

  • With the 1st quarter $9.5 billion capital contribution, GE will have contributed $15 billion of capital into GECS over the last 6 months. GECS will have $63 billion of total equity, $34 billion of tangible equity and $36 billion of cash.
  • As a result, GECS ratio of tangible common equity to tangible assets is 5.3%, which compares very favorably to other financial service institutions.
  • Reducing the GE dividend in 2H ’09 will result in $4.4 billion in incremental cash in the second half of 2009 and about $9 billion annually.
  • As committed in December, we have further reduced our commercial paper to $60 billion and have completed 71% of our ‘09 long term debt issuances.
  • We have de-levered our balance sheet. Our debt/equity ratio will decrease from 8 to 1 to 6 to 1 (including hybrid debt).
  • We have ~$70 billion of remaining capacity under the TLGP and ~$98 billion of access to the CPFF if necessary.

Currently, we have no plans to raise additional equity. In the unexpected event that GE Capital requires additional equity, we have a number of options to satisfy that need without seeking external capital.

We have stressed-tested our financial service portfolios and do not see the need to raise additional capital. We plan to present results of these tests at our upcoming earnings webcast to further demonstrate the quality of our portfolio and ability to absorb potential losses in this difficult environment. Over the last several months we have significantly increased disclosure regarding our financial services businesses. We are committed to continue to enhance disclosure and transparency for our investors in the future.

We know these are challenging times, please be assured that we are taking the steps to ensure we keep GE safe and secure during this tough economic environment.

Read the letter sent to investors


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  • poor engineer

    I think we see a cmmon thread here. GE managment says ‘ we are in good shape’ and the stock tanks. What dose that say about GE’s word in these trouble times. In my 36 years at GE I know what would have happened to me if I had just a fraction of the bad results the current managment team has had. The ecomony is bad but it is not the whole reason for the "end" of GE. I guess I will not have long before the other shoe falls and the Pension GE promised goes the way of the Stock . Jeff, PLEASE do not come out a say the Pensions are safe. Your words are the "Kiss of Death".

  • R May

    We appreciate your comments but nothing seems to be working. I certainly hope your Q1 results hit the ball out of the park because that what is happening to this stock is killing us.

    Death by a thousand cuts, or in this case three thousand shares…

  • Lawrence Hall

    I believe this response is to generic for the analyst that track GE. They want more details. The first quarter earnings report may be the most critical in the history of GE.

  • Chris

    Hi,
    I hate to ask this, but the assurances are becoming somewhat empty after the fiasco with the dividend.

    "Currently, no plans" – weasel words

    I have had GE shares for a very long time, and still own it, but management’s credibility is completely shot.

    More information shouldn’t wait for the earnings webcast. Do it NOW.

  • Rick

    There are a LOT of retired folks out here that are worried about their pensions. I understand the dividend cut…could you address the strength and Company commitment to supporting the pension fund? This is a very important question, as there are many thousands of frightened retired GE folks reading this page..
    TIA, Rick

  • PK

    The best thing GE can do now is slash costs and beat the wall street earnings numbers for Q1 and 2009/2010. The costs for GE Capital still seem high. More layoffs are likely needed. You have to save this great franchise. If you told investors you can hit $1.40 per share in 2009, then make that number. Cut more costs. Why not eliminate the dividend for now. At the $6.00 level, use the income to build on the franchise and protect it.

  • JOJo

    Jeff:

    It’s time to come out with the truth and only the truth! GE is dead because of POOR MANAGEMENT DECISIONS…NOT the economy!

    Check out this articles…should we all join?

    Shareholder Sues General Electric, Immelt Over Dividend Cut
    CNNMoney.com – USA
    NEW YORK -(Dow Jones)- A shareholder has sued General Electric Co. (GE) and several top executives, including Chief Executive Jeffrey Immelt …

    http://money.cnn.com/

    I’m having a hard time believing GE Stock hit at $5.73 today….GE was such a great company to work for and great products to have in a home!

  • Sun

    Why would we (shareholders) can trust this? For all we know this can prove to be false in a month or less.

  • Sun

    PK, I agree with you. GE can hit 1.40 in 2009 but in share price.

  • kris k

    Why should we trust this statement? You made a similar positive claim about the dividend.

  • YZ

    Investors, rightly or wrongly, don’t believe in GE management’s assertion. What GE could do, is to spend $7B of the $50B cash on hand to buy back 1B shares of stock. This would demonstrate that GE has the excess capital, as well as save $100M dividend payout per quarter. Other actions could take are, cut the dividend to 0, freeze GE capital’s new loan origination, cut GE capital’s headcount by another 30%, or spin off GE capital (don’t know if it is possible). GE must take decisive actions to protect the industrial side of the company.

  • Lisa Lanspery

    Hi JoJo, this is Lisa from GE Corporate Communications. Our communications on the dividend have been clear. On February 6, we stated that were were evaluating the dividend for the second half of 2009 given the continuing deterioration of the economy. On Feb. 27, the GE board announced its plan to reduce the dividend for the second half of the year.

  • Show me the Money

    Just got some news that in Australia we wont be receiving our pay rises for the 2008 year, not a concern in fact I praise the decision, particularly since Mr Immelt showed leadership by giving up his bonus & taking a 28% pay cut – what I can’t understand is why the rest of the board didnt follow suite, the recent AR outlines bonuses to all other exec’s, cripes even the GE Capital boss took a bonus?…..Oh I hope they legislate this throughout the western world that if your on a public company board then you gotta anti-up – not stock options, if you want $3 million a year in salary then you get $1.5m in cash the rest is stock and you must maintain this througout your tenure, if you leave the company you cant sell for 3-5 years, its that simple!!!

  • Shortseller

    "Currently" means as of the time this statement was written. But Tomorrow is another day. Look at the last statement about not having to raise equity and then you have it happen.

  • Bud

    Any truth to this?

    This insanity is caused by the CDS feedback loop; here’s how it works.

    I buy a CDS on GE (a few weeks ago) for a couple hundred basis points ($200,000 per $10 million)

    The SELLER of that CDS protects against possibly having to pay by shorting whatever he can against that short credit position. This means he buys PUTs, he shorts the common, he does whatever he needs to in order to lay off that risk. He does this because if GE goes bankrupt their stock would presumably go to zero; therefore, if he has a potential $10 million exposure on the CDS he will short $10 million face value of the common stock, or buy enough PUTs to pay him $10 million if the stock goes to zero.

    The PUT writer (assuming he buys PUTs), being a market-maker, will in turn short the common to lay off the risk as well.

    This hammers the stock price which then reflects into the pricing models for the CDS, driving them higher.

    This cycle repeats; unfortunately credit rating models include market cap as one of their inputs, which causes a credit downgrade (eventually.)

    That in turn adds more pressure.

    This cycle is repeated until the company is destroyed.

  • R May

    "Recently claims have been made that GE will be required to raise new capital near term. This is pure speculation, is inaccurate and is not based on any input from our company."

    But it doesn’t tell me that it won’t happen… I hope you are gunning for a triple-A rated Q1 so you and we all can distance GE from BAC, C, and the rest of the pure-play banks out there in such deep trouble, and get back to business. This is really killing me.

  • Gary

    GE Capital has not been explaind to the satisfaction of the investment world. It is necessary for Immelt and Neal to sit before the best and toughest GE Capital critics in a nationally televised forum to explain and rebuff any and all items about GE Capital.The time for absolute clarity and truthfullness is now !!!!!GE Capital should be no more than 5% of Ge if it is to recapture investor trust.This should evident to management as it is to everyone else.Stoskholders are tired of hearing how good GE capital is as I only see a bank that can take GE down.It is time for this black box with hundreds of billions of bad dept created by Jack W to go !!!!!

  • Russ

    JO-Jo
    What about when ji said dividend was safe for ALL of 09?
    Just another dumb fumble and that was not too long ago, but long for him.

  • EC

    The bottom-line is GE management gets an "F" for its forthrightness (or lack thereof) regarding GE Capital.

    The message from investors, which can be seen in the stock price, is "we don’t believe you."

    So, here’s a simple, two-point plan:
    1. Sack Mr. Neal
    2. Open the books on GECS to Wall Street analysts.

    If you truly have nothing to hide, then let’s get on with it. Show them EVERYTHING you’ve got until their hearts are content.

    Do whatever it takes to save this great company. Don’t let GE die on your watch.

  • mijon

    What scares me is that last sentence. "Please let..I..know"? Can’t GE find a communications director with basic english skills? And who is Joanna? Honestly, it looks like the lunatics are in full bloom here. Doesn’t enhance confidence.

  • shomitgoel

    I don’t understand y so much fuss about GE stock plummeting to record low levels.These are unprecedented times, everything from A -Z is tanking.

    It’s more crisis of confidence in the company vis-a-vis crisis in the company.

  • William C Bitting

    As a stockbroker back in 1960 I can report that when General Electric shares were sold on the NYSE, no money changed hands on settlement date unless the seller delivered shares to the buyer, usually in the form of paper certificates, with any and all documentation required for "good delivery." Without good delivery, no money changed hands.

    Although I can find no authoritative source such as from GE’s internal legal staff or GE’s outside law firms to confirm it (or deny it), my impression is that today sellers of General Electric’s stock routinely are paid cash money on settlement date without having to make delivery of the shares sold. If that conditions exists, then is it any wonder the stock closed Wednesday at $6.69, down 32 cents (while the market was up just under 150 points on the DOW), after trading as low as $5.73? That means at the closing price the stock is down 70% since the early October 2008 underwriting priced at $22.25, and down over 88% since its all time high price of $60.

    In a supply / demand market, somehow an unlimited supply of stock has a way grinding prices to zero, particularly financial services companies where falling share prices sometimes can trigger ratings declines and other hazards.

  • Rapp

    Jeff Immelt tells us again and again, that GE is in good shape, but the confidence has disappeard
    If his words are really true, why reacts GE only instead to act
    Announce a substantial stock buyback programm right now!
    The reputation of GE depends not only from the AAA Ranking which proved to be worthless ,but also from the stock price!
    In regard to the AAA Ranking:
    Do you really not see that GEis a hostage of Moody etc
    the AAA Ranking was used as a weapon against GE during the last months and it could not stop the free fall of theGE stock price

  • Cyclops

    This letter is another sign of cluelessness and desperation. GE management lives in the Matrix (they all took a blue pill though.)

  • FrankieD

    The comments from GE are the same they have been using over the past 3 months. "same church, different pew". The idea of announcing a stock buyback is new and creative. Yesterday there were over 750,000,000 shares traded – there a certainly a lot of sellers. $2.5B of the stock dividend cut could but back 5% of the stock (@$5/share). Now that would be a tangible indication of confidence. Words from GE regardless who says’s them are meaningless. Sad, but it is what it is.

  • Eugene Hersh

    I am a retired Engineer and after 4o years I never experinced such a low level of confidance in the leadership of GE.
    I hope things will change in Orlando this April.
    Can we ask Jack to at least help by more activly consulting and can we take the 148 VP,s and reduce them to a as needed number. At the same time I do agree that commiting $15B to buy back stock at the $6 per share would help in retaining confidance.
    Lets do somthing besides puting out statments of elegant but empty words.
    Lets take the bunch of our "Verbal Mechanics" and issue them screwdrivers to get some hands on help.

  • dividend investor

    I just hope that GE stays under 7.50 I do not want to have my shares assigned. I could buy more GE with the premium

  • Sun

    Dividend investor

    The longer GE stays under 10 or 7.5 as you stated, the more likely it will got for a zero. Just look at Citi (C).

  • Phil

    Per Immelt "business performance drives stock performance." Evidently, the investment community no longer has any confidence or trust in the current irresolute GE management team, which has reneged on all recent promises to shareholders! The shareholder meeting in April should be very interesting!!!

  • Ed

    To GE leadership:
    GE can recover and the stock price can go higher if GE leaders can take proactive decisions that can bring this company back to its’ grace and where it should be. GE has an extremely pool of so many talented employees, with passion and dedication. GE top managements needs to start listening to the grassroots employees, the people who truly make things and service things.
    Here are some of the suggestions that can change the direction of GE to the better and can result in turning this company around:
    For the year 2009 only, immediately implement the following.
    1. All GE officers will receive their compensations in GE stock, no cash. This can result in preserving about $ 1 billion in cash. It will also re-inject confidence in the company stock value.
    2. All GE VPs, general managers and high level Executives band employees will receive 50% of their compensation in GE stock and 50% in cash. This will preserve an additional $ xx billions in cash. (ratio can flexible based on band)
    3. GE needs to suspend all “Mylearing” activities. Convert time spend on it, to a more productive time in front of customers, help making and/or servicing products.
    4. GE should convert all rotational assignments to a more productive revenue generating employees. The business, at this time and at this stage of the economy, can’t afford the expense and time allocated for this purpose. There is a massive support structure behind the scene that supports this group. Time and money can be spent on more productive work.

    5. GE future initiative and vision: 100/100/15
    GE should embrace and initiate, a vision and a goal, which I would call:
    100/100/15 means, simply put: 100,000 employees, $100/share by the year 2015.
    More details about this initiative, if top management wants to hear more on how to accomplish it.

    With GE resources and talents, GE can be the envy of all companies again and it should be. It can happen if the right decisions, the right vision, and proactive steps are taken to make it happen. And at the end, no more single digit stock price.
    Do you agree?

  • Phil

    Pay for performance … a good start to cost cutting: no bonuses or IC for all GE Senior Executive Officers, Corporate Executive Officers, and Corporate Staff Officers; no bonuses or IC or raises for anyone in GE Capital; a 68% reduction in bonuses and IC for all SEBs and EBs elsewhere in the company; and a 68% reduction in compensation for the BOD that failed in its oversight capacity!!! If ‘business performance drives stock performance,’ shouldn’t GE company leaders bear some responsibility [and pain]???

  • Chuck R

    Yes, GE by cutting your dividend by 68% on the backs of your most loyal shareholders you’ve alienated us all. Instead GE you should have cut the compensation of all your employees. That would have given GE stock a positive pop. Most of us former loyal shareholders were getting much less than
    an 8% dividend because we bought and held at a much higher price. After the dividend cut we would be getting less than a 2% yield. As the yield is dependent upon the purchase price not the trading price.

    Why hold GE for a yield less than 2%?

    Loose $31 Billion of market cap to save $9 Billion…That was brilliant. Why not
    cut the dividend out completely so the stock can go to zero.
    Chuck
    Lake Mary FL

  • mmm – opportunity!!!

    To all you doomsayers – Some of you need a history lesson and an economics lesson, our saviour will be ourselves – firstly GE has weathered every econimics crises this world has every seen, can anyone name me a conglomerate that has outlasted it, besides the Roman Empire? 2ndly we will save ourselves, I use Australia as an example, I have used conservative figures, we contribute around $24billion a year to superannuation – if its not going into investing in equities where is it going, in Australia we have the highest yields out of all the stronger economies (cash rate around 2.75%) but people are not happy with 2.75%, in the US with around 150m working and an average contribution per year of $4000 thats $600b per year into investment – are you and your funds happy with getting your current 0.25% return they are paying in the states, no this money is sitting there just waiting for an opportunity – thats whats different between now and the 1929-33 – compulsory super our saviour!!!

  • Ross

    Is that true $600b in super investments – GE why dont you get into the funds management business?

  • Ryan

    I have to disagree with you Ed. Simply put, the company should be buying the stocks, not put into commission for employees. Cut commission by 10% or even 5% and use those funds for purchasing stock back to GE. This prevents future problems. If the stocks are bought as commission to employees, what happens when the timeframe to hold ends? Future Problems! Employess should be buying know, just knowing what the future holds.

    I would agree with mm. GE is not going anywhere. To bounce back quicker:: take shares off the market and as the prices then start to rise, sell slowly and put the earnings back into the company. The future P/E is looking so nice right now. I am excited for the on-coming years knowing that I bought GE at 6/share with the future showing a much higher value.

    I think it is a huge win for those with money on the sidelines– getting into a strong company at such a low cost is like winning the lottery. Those that have owned GE during this downfall do not give up. Hold on tight to those shares and do not accept such a loss. Do not fall victim to the fear. The price will rise…if you have any extra cash throw it in for some nice profit down the road!

  • Al

    From Warren Buffet’s 3/9/09 interview on CNBC.
    "8:54a: What is the biggest lesson you learned in 2008? Buffett answers it is the dangers of extreme leveraging. Leveraging up is a "lot of fun on the way up" but can be a "tragedy" on the way down. The lesson that needs to be learned is we shouldn’t let big institutions be "unchecked" in their use of leverage."

    I hope Immelt, Neal and Sherin learn this lesson!!
    Actually, for the damage they caused to share holders and employers and retirees, in the traditional japanese way, they should commit Harakiri (I mean, professional Harakiri, resign!).
    Al

  • Lawrence Hall

    What happened to the scheduled March 16th date to discuss GE Capital?

  • Richard Tanner

    I see many of us are seeing a company that seems to only give us lip service and not a dividend hike.
    If Our leader gets some super high check this year ,why do we not get just a few pennies more per share dividend?
    The stock even went down today!!! Has the management at the top have no sensitivity?

  • Richard Tanner

    Hurry !! we did get get a penny divident per share. Now maybe we could also afford a Home in Switzerland. My faith in the GE company still has not been restored. I keep seeing sell signs in many places
    .I think I’m going to think very seriously about selling my shares.I’m still above the point where I bought them.
    I should get into some of Carla’s great cash cows that pay over 10% and some great and safe ones
    just below 10%
    They listed the stocks you could safely invest in for the next 100 Years. Needless to say GE was not
    one of them on that list.
    Richard