General Electric Co. (GE), a diversified technology, media and financial services company, Tuesday revealed a new organization structure at its finance arm GE Capital, which is expected to result in about $2 billion in savings for the unit in 2009. The new structure, which becomes effective January 1, 2009, divides GE Capital's businesses into three regions.
According to the Fairfield, Connecticut-based company, "…this new organization will help us lower costs, operate efficiently and capture profitable, high-margin originations across key platforms and geographies today and as the global economic situation stabilizes and begins to recover."
Reports said the $2 billion savings, equal to about 15% of the division's cost base, would come from staff and expense reductions as well as disposals of highly leveraged credit assets. The division has about 75,000 employees and the number of job cuts is not known now.
The new organization will have William Cary, head of the consumer finance group GE Money, in the newly created role of chief operating officer. The three new regions, Americas, Asia and Europe, Middle East & Africa will be led by Dan Henson, John Flannery and Rich Laxer, respectively.
The company has also created two new platforms, one for consumer-focused international banks and joint ventures, and another focused on optimizing returns on non-strategic assets. These platforms are expected to take advantage of new opportunities and leverage the company's expertise. The platform focusing on banks and joint ventures will be led by Dmitri Stockton, while the latter would be run by Mark Begor.
GE had announced in July that it was bringing together its financial services businesses under a common umbrella. Commenting on the changes, Michael Neal, chairman of GE Capital, said Tuesday, "Over the last two months, we have acted decisively to improve our funding position. We reduced our leverage, successfully raised capital, and accessed government programs that level the competitive playing field for us in financial services.
"Through these actions, we have strongly improved our 2009 funding outlook, and continue to reposition GE Capital for long-term performance and to play offense as conditions permit. This new organization aligns our operations with our strategic and funding plans," Neal added.
The credit market turmoil has hurt GE Capital deeply. The parent company said in early October that its earnings for the third quarter dropped 22% from last year to $4.3 billion or $0.43 per share, dragged down by the struggling financial arm GE Capital that reported a 33% decline in profit. At the time, GE said it expected to earn between $19.5 billion and $21 billion overall for 2008 with over $9 billion coming from GE Capital.
GE Capital said on November 12 that the Federal Deposit Insurance Corp. or FDIC approved its application for participation under the FDIC's temporary liquidity guarantee program. Under the terms of the debt guarantee program, the FDIC guarantees GE Capital's senior unsecured debt, including commercial paper and term debt, issued from the date GE Capital becomes eligible under the program through and including June 30, 2009.
GE closed Tuesday's regular trade at $16.06, down $0.05 or 0.31%, on 135.14 million shares. For the past year, the stock trended in the range of $14.58-$38.67.
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