GE Picks Right Time To Cut Finance

| About: General Electric (GE)

GE CEO Jeff Immelt has been trying to shrink his company's finance unit since he stepped into the job in 2001.

Despite his efforts, that unit, the product of Jack Welch's reign, has continued to grow and Immelt has found it to be invaluable in helping him make acquisitions, even at times of financial stress.

But there are now signs it's time to move forward. Citing "investor concerns," The Wall Street Journal reports that the company is considering a sale or spin-out of its consumer finance unit, which helps finance the sale of large GE appliances. The company also took a special $4.5 billion dividend from the financial arm this quarter, which should make this quarter's comparables easier to make, even with a slowing global economy.

The main point for investors is this may be a good time to sell. Consumer loans carry some of the highest interest rates in banking, and with the recession fading into the past the quality of that portfolio is probably pretty high. This means it can bring in a premium price.

GE bears will note, like setting oneself on fire, it's a trick you can only do once, and that many of the company's industrial divisions, including energy, face tough times that it will take several quarters to emerge from. Now 58, Immelt still has about seven years to go before reaching GE's retirement age of 65, and while investors may well rue the day he replaced the legendary Jack Welch at the helm, given Welch's ability to grow the company's value forty-fold and Immelt's failure (so far) to advance it at all, it's his ship.

Disclosure: I am long GE.