General Electric Co. (NYSE:GE) is looking to replace Capital Chief Michael A. Neal, who has held the position for 8 years and is expected to step down as soon as this summer.
This leadership transition comes as GE shifts gears toward focusing more on industry and trimming back its financial sectors. GE Capital alone would be the country’s fifth-largest bank, and the company is looking to downsize. The financial crisis of 2007 upended GE Capital, and analysts believe that this change in leadership is a sign that the financial sector of the company is now on stable ground.
Neal helped GE Capital grow to its peak size in 2007 and guided the company through the financial crisis that exposed the weaknesses in its previous growth model. Now that the financial unit is stabilized, the company would like to cut back its focus to only lending to midsize businesses.
GE Chief Executive Officer Jeffrey Immelt has outlined a plan to cut back GE Capital even further, selling off more of the financial arm’s businesses in order to turn GE’s focus toward industry. Another potential cut could be the sale of the consumer retail finance operation. Immelt’s goal is for GE Capital to eventually only count for 30 percent of GE’s earnings from continuing operations. That figure was at 46 percent last year. Immelt is looking to increase the company’s industrial sectors to 65 percent of GE’s total profit. That would be a 10 percent increase from 55 percent last year.
GE Capital didn’t lose any money during the economic downturn, but it did have to cut its dividend for the first time in company history, a move that cost GE its triple-A credit rating. The company was downgraded to an AA-plus rating and forced to rely on government-backed funding programs to get through the recession.
Neal, 60, has been a successful leader of GE Capital. The Wall Street Journal reports that his choice to leave is probably related to his being of an age at which many GE executives choose to move on. GE Capital made a profit of $7.4 billion on $46 billion in revenue last year.
Possible replacements for the greatly-admired Neal include William Cary, chief operating officer of the unit and a former head of the consumer operations, and Mark Begor, who runs GE Capital’s real-estate division and capital restructuring operations.
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