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January 16, 2009
General Electric Co. said Friday its finance business has informed employees of layoffs, following up on previous statements that it would restructure the battered financial unit.
GE Spokesman Russell Wilkerson said GE Capital is informing workers of the job cuts, though he would not say how many employees will lose their jobs. GE Capital employs 75,000 workers.
The Fairfield, Conn.-based conglomerate, which manufactures locomotives, water treatment plants and numerous other industrial products and owns NBC Universal, said in November it would reorganize its GE Capital unit to save $2 billion next year. The move was intended to include job cuts as the business restructures and shrinks the size of the lending arm hit hard by the credit crisis.
GE Capital has suffered like other lenders as credit dried up last fall. To add liquidity, GE Capital will rely less on the market for commercial paper, where it is a huge player, and will strengthen programs like certificates of deposit to bring in cash.
GE also has taken steps to tap federal lending programs that could provide up to $230 billion in liquidity.
Ratings agency Standard & Poor's last month lowered its outlook for GE and said there is a chance it could lose its coveted top credit rating because of troubles with its finance arm.
Analyst Nicholas Heymann of Sterne Agee in New York said in a note to investors Friday he believes the company's debt rating could likely be reduced from AAA this year.
He said he believes GE will soon announce an additional $5 billion equity contribution to GE Capital, perhaps when it announces its fourth quarter and full year 2008 results Jan. 23.
Heymann said GE's fourth-quarter results are "likely to demonstrate aggressive restructuring actions, but could underscore concerns about dividend sustainability."
CEO Jeff Immelt said last month that GE would maintain its dividend of $1.24 next year. He told analysts that the 'AAA' rating promotes discipline at GE and that he views it as equally important as paying a dividend.
But Heymann said he believes that a reduction in GE's AAA credit rating and $1.24 dividend are "increasingly probable" this year. He said investors should watch to see if GE can continue to avoid converting to a bank, which has been required by all other financial institutions receiving government assistance.
Shares rose 17 cents to $13.94 in late afternoon trading.
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