As investors continued to fret over GE Capital”™s exposure to bad debt, potentially impacting the price at which Fairfield-based GE is able to borrow money, General Electric Co.”™s shares fell below $9 in late February, the first time the issue dipped below the mark since 1995.
In advance of GE”™s annual meeting in Orlando this April ”“ and ongoing layoffs at various units ”“ CEO Jeff Immelt declined a bonus, though GE”™s three vice chairmen pocketed bonuses ranging between $2.5 million and $2.9 million.
One of that triumvirate, John Rice who heads GE Technology Infrastructure, which includes GE Aviation and GE Transportation, said last month that the massive stimulus program from the U.S. government should help the company ”“ provided the infusion restores a semblance of normality to the credit markets ”“ and the company is aggressively pursuing project opportunities.
Rice said GE remains committed to cutting costs in line with the overall economic outlook. At the end of 2008, GE had 322,000 employees worldwide, down about 5,000 from 2007. Some 152,000 workers were in the United States, down about 3,000 from the year before. GE is the second largest employer in Fairfield County with just more than 5,000 employees at last report.
“It takes a while for things to flow through from Congress to the people who are going to spend the money and cut the purchase orders,” Rice said at an investment conference in Las Vegas sponsored by Barclays. “There”™s a lot of activities in the second half of 2009 and 2010 that will depend on financing ”¦ and there is going to have to be liquidity in the system.”
More than $21 billion in unrealized losses at GE Capital could force GE to cut its dividend in order to ensure its own unit has adequate liquidity, according to Deutsche Bank analyst Nigel Coe as cited by Dow Jones News Wires, particularly if unrealized losses continue to grow as Coe predicts.
GE remains committed to the financial-services industry, Rice said, but GE Capital will remain open to adjusting its service portfolio according to the overall market. In the past year the company had shed multiple units affiliated with its GE Money consumer-finance arm.
“We have portfolios and businesses in aviation leasing, in energy, and some of the other middle-market activities that we actually like quite a lot,” Rice said. “Although today”™s market does not ascribe much value to them, we do ”¦ You can go back through cycles; the last cycle in aviation was after 9/11 and our aviation-leasing business came out stronger. We see no reason not to be in those businesses.”
Rice said that while GE”™s energy businesses are performing well, they could fare even better if some of the projected infrastructure spending promised by the Obama administration takes root ”“ particularly on projects that have proven difficult to budge forward under normal circumstances.
“Building five nuclear plants would create a lot of jobs, and there”™s enough on the drawing board that you could be putting shovels in the ground in a matter of months if there was the political will to do that,” Rice said. “So the question for me is less about the rest of the world than it is about the United States, and why we”™re still messing around after having been revving up the engines for at least the last five years.”
