Wednesday, April 6, 2016

GE: ‘BACK TO BASICS’ OR BACK TO REALITY?

GE: ‘BACK TO BASICS’ OR BACK TO REALITY?
In reading The New York Times assigned article re GE’s Immelt deciding to get GE out of the financial markets business and back strictly into the business of making things, I found many contradictory statements regarding their true intentions, whether reported or delivered via strategic positioning. My grandfather actually worked as a lead finance director for GE in Havana, Cuba. In the beginning of the 1950’s the area was full of promise. Havana was considered the “Las Vegas” of the Caribbean. It was no surprise that GE abandoned its Cuban operations following Castro’s revolution. But instead of abandoning its global investment efforts in developing nations, some of which could turn tumultuous, they increased efforts.

In the years following my grandfather would lead GE’s finance efforts in Bogata, Columbia. As Immelt says in the article, you should look at what’s happening around the world, know the points of views and invest around that point of view. Post the 2008 recession, the point of view was to be careful and weary of the financial markets. Today, while the markets are better, they will still never be the same. Getting back to basics wasn’t, in my opinion his clear intention as CEO – rather it was getting back to reality. Investing in “building things” and getting back to GE’s light-bulb founding history was the right strategy in 2010.  In reading the 5 competitive forces article, GE has very high walls, and like Pepsi and Coke their core business offerings make revenue. And, this is the safest bet for their bottom lines.

It looks like they are sticking to this ‘back to reality’ strategy five years later. Just last week, GE asked for a “request for recission” from the fed, saying that its financial portfolio is now so small that it shouldn’t be considered interconnected to the financial system. As of today, they’ve exited US consumer lending for an overall 80% reduction in its financial assets.

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