By Dow Jones Business News, March 20, 2013, 02:05:00 AM EDT
SYDNEY--General Electric Co. ( GE ) may consider spinning off financial services unit GE Capital to simplify its
structure, although it's not currently pursuing any such move, Chairman and Chief Executive Jeff Immelt said Tuesday.
"Our challenge is always structure and bureaucracy. Every 10 or 15 years in a company like GE you have to kind of be
willing to blow it up a little bit internally and start over again," Mr. Immelt told industry leaders in Sydney about
the company's wider strategy.
When talking specifically about plans for the GE Capital unit, Mr. Immelt said General Electric wasn't actively
working on any spin off. "But I'd never say never." he added.
"We always look at what are the right capital market alternatives for the company and what makes sense for where we
are. We sold our media business, right." Mr. Immelt said.
The comments come as the Fairfield, Conn. conglomerate shifts its focus to core industrial businesses such as energy,
while shrinking the financial services division and exiting units like media in a bid to restore investor confidence.
The rapid industrialization of Asian economies is driving continued demand for energy, while financial services
markets in developed economies remain subdued in the wake of the financial crisis as investors hoard cash and trim
General Electric recently reduced the size of GE Capital by about a third to sharpen the unit's focus on areas where
it believes it has a competitive advantage versus banks like aircraft financing and lending to mid-sized businesses.
Fourth-quarter operating profit at the GE Capital unit increased by 9% to $1.81 billion, while profit at the
industrial division increased by 12% to $4.89 billion, according to company filings. Mr. Immelt said investors are
placing a much higher value on the industrials business than the financial services unit, which he said has a "
dramatically" lower valuation than it did before the financial crisis.
Last month, the company said it plans to cut costs by more than $2 billion in the next two years and would fund the
restructure with the $13.5 billion in proceeds from the sale of its remaining stake in media group NBCUniversal to
On the wider global economic outlook, Mr. Immelt said he expected developed countries to grow slowly in the immediate
future with emerging economies in Asia, Latin America and Africa taking up the slack.
While the debt crisis gripping the small European country of Cyprus isn't a financial catastrophe, the broader
European region is in for a "slog" for "a reasonable period of time", he said.
The U.S economy meanwhile is in "unprecedented territory" in terms of the level of debt it's carrying and it's unclear
whether fiscal stimulus measures will trigger a spike in inflation. "From a company standpoint it just means that all of
us are going to carry more cash," Mr. Immelt said.
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