Is GE Becoming More Conservative?

General Electric Co. (GE) Chief Executive Jeff Immelt said on March 10, 2008 that revenues should rise by at least 10 percent to $195 billion this year for the industrial, financial and entertainment conglomerate.

"In 2008, we should hit all of our financial goals and outperform the S&P 500," he said in a message to investors in GE's annual report.

Immelt met his forecast as GE's revenue totaled $47.23 billion, up 11 percent, beating the 10% in revenue. However, third quarter earnings were down over 22 percent, falling to $4.3 billion, or 43 cents per share, compared with $5.56 billion, or 54 cents, a year earlier.

GE said it was seeing rising delinquencies on its consumer and commercial finance business. It plans to set aside provisions for pretax losses of $6.6 billion this year, a sharp rise from 2007 and it expects losses to rise next year to $7.5 billion to $9.0 billion.

Results were dragged down by a 33 percent profit decline at its capital finance business, GE stated. The plan was to cut this division to 40%. What they did not report was the reduced margins continuing as their cost of money was rising, the large commercial market not only more competitive, but also "expensive."

At quarter's end, the company had $88 billion in commercial paper, down from $100 billion earlier this year, which GE said they would reduce commercial paper to by the end of the year.

In addition manufacturers, dealers, and distributors were talking about losing business as the tightening credit by GE Capital had become too "conservative" and the "selling rate" was too high for the better credits who could, and do demand, the best rate. Divisions were reacting to the changing rates, and it was reported over 30 salesmen were let go at the GE Healthcare Finance unit, with more cuts to follow.

GE Commercial Finance in 2007 had $135 billion in assets making it the largest equipment/leasing company in the United States, with the second International Lease Finance (AIG) with $42 billion and third was CIT Group with $36 billion.

In blaming the third-quarter results, other units were mentioned, such as "consumer and industrial," which makes appliances and other such products. It had an 82 percent drop in profits and the company has announced plans to sell this appliance unit.

Again there was talk by investors that GE should sell NBC. Even though the Olympics generated $1 billion in revenue, GE reported they had a lost on the event, but did not name the number. Television Ratings for the Summer Games exceeded expectations by 20%, according to GE CFO Keith Sherin who on Friday lauded the company's work and efforts for its coverage.

GE told investors it expects about $9 billion in profit from its financial units this year, even with fourth-quarter income lower than the third-quarter.

There was talk the company was exploring becoming a national bank, looking into the process of a charter, but the investment by Warren Buffet of $3 billion changed that direction; perhaps just for the time being. In Europe, GE has many offices that act as banks.

Stock position: None.

Comments

[strategyleader:]

GE is a remarkable company that has not only survived, an accomplishment in itself, but PROSPERED... all the current management needs to do is learn from ITS OWN PAST LEADERS and ADAPTATION to major changes and it will continue its heritage.

However, the company is much more COMPLEX and this is one of the reasons that it is having CREDIBILITY problems... it is very difficult to keep track with the changes it has CREATED ON ITS OWN...and not just the complexity of the world today.

I hope that the GE Leaders have learned from its own history.

Bill Rothschild, author of the only comprehensive, objective and insightful GE Strategic HISTORY and INSIGHTS...THE SECRET TO GE's SUCCESS...

2008 Oct 14 05:37 PM

[rusty66jag:]

Can we please dump this idiot Immelt? Preferably without a parachute at all, less a golden one. From 30000 feet.

2008 Oct 15 04:00 PM