GE to slash $2 bn in costs at finance unit

GE to slash $2 bn in costs at finance unit

New York: American conglomerate General Electric is planning to slash costs by $2 billion in 2009 at its finance arm GE Capital, the unit which has been severely hit by the global financial turmoil.

In a statement issued, the company announced a new GE Capital organisation structure to drive growth.

“With this more efficient organisation, we are projecting approximately $2 billion in savings at GE Capital in 2009.

These savings and the continued focus on optimising the portfolio increase flexibility and vantage of opportunities created in the current market and drive value for our shareholders, a statement on GE, one of the websites of the company said.

The new structure coming into effect from 1 January, 2009, would consist of operational poles in Europe, Asia and the Americas.

We also have created two new platforms to take advantage of new opportunities and leverage our expertise, one for consumer-focused international banks and JVs, and another focused on optimising returns on non-strategic assets. The new structure is effective 1 January, 2009, it noted.

Meanwhile, UK daily Financial Times in a report published online today said, “General Electric is to shrink GE Capital, its finance arm, in a move that could lead to $2 billion in cost cuts, the sale of $90 billion in highly leveraged assets and thousands of redundancies among its 75,000 employees."

According to Michael A Neal who is the chairman of GE Capital, over the last two months, the firm has acted decisively to improve the funding position.

“We reduced our leverage, successfully raised capital, and accessed government programs that level the competitive playing field for us in financial services," he said.

“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," Michael A Neal said.

It also added that the new organisation would help in lowering costs, operate efficiently and capture profitable, high-margin originations across key platforms and geographies today and as the global economic situation stabilises and begins to recover.