While Fairfield-based General Electric Co.’s plan to reorganize its finance unit is welcome, an analyst said today he’s not sure how the company will save as much money as it says it will.
The conglomerate which makes appliances, lighting, aircraft engines, turbines and other products, and runs the NBC television network, said it is reorganizing its GE Capital unit to save $2 billion next year. The plan will require job cuts the and will shrink a lending operation battered by the global credit crisis.
Details are expected on Dec. 16 from Chief Executive Jeff Immelt.
The changes, which include establishing centers for GE Capital in Asia, the Americas and Europe, will take effect on Jan. 1. It will also have a unit focusing on banking and another on restructuring.
“We clearly welcome these more aggressive moves to ‘derisk’ GE Capital and streamline efficiency,” Deutsche Bank-North America analyst Nigel Coe said in a client note.
However, he reiterated a “hold” rating on the shares, saying “the problem right now is that we simply do not know how this $2 billion will be achieved, nor the associated revenue impact (scaled back financing and/or disposals) and required restructuring actions.”
GE Capital, which makes loans for everything from consumer car purchases to commercial energy projects, is expected to make around $9 billion this year. The company projects the financing division will provide around 40 percent of its overall earnings by the end of 2009.
But the ongoing turmoil in the banking and credit markets has been a blow to GE Capital. In October, the company said GE Capital posted a 33 percent profit decline in the third quarter, helping to drag down GE’s overall quarterly results by 22 percent.
At 11 a.m., GE shares traded at $15.84, down 22 cents, or 1.4 percent. (AP)
