Are Shrinking Assets Key to GE’s Bright Future?

Jeff Immelt, Chief Executive Officer of General Electric (NYSE:GE), has said the company will use initial public offerings to further goals of shrinking its financial arm, GE Capital.

Immelt’s goal is to cut GE Capital’s assets down to half of what they were preceding the 2008 financial crisis by 2014. In addition to possible IPOs, the company will continue selling off real estate businesses, insurance operations, and overseas banking stakes. Immelt would like for the company to continue to grow its industrial profits. Industry accounted for 54 percent of GE’s profits last year, and Immelt wants to see that number grow to 70 percent.

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Immelt said that GE is “thinking strategically” about which of GE Capital’s non-core businesses to sell off. GE Capital’s global mortgage businesses and commercial real-estate units have previously been labeled as non-core, though Immelt didn’t give any specifics as to which businesses the company would sell or spin off. Immelt said that initial public offerings were a desirable option for continuing to shrink GE Capital, ”the capital markets are very receptive to IPOs…So I think you basically have as good a setting as you could possibly have.”

Immelt would like for GE Capital’s ending net investment to total between $300 and $350 billion by the end of 2014. That figure was $402 billion at the end of March, down from $630 billion before the financial crisis, and below Immelt’s earlier target of $425.

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Shrinking GE Capital’s ending net investment would, “create excess cash in GE Capital, and we are going to use that excess cash to buy back stock. We would like to get our share count down to 9 billion to 9.5 billion shares by the end of 2015,” Immelt said.

GE has thus far been successful at meeting its goals to shrink GE Capital under Immelt’s leadership, and spin-offs through public offerings will help further reduce GE Capital and leave more room for the company to focus on industry.

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