Nov. 13 (Bloomberg) -- General Electric Co.’s plan to obtain U.S. government insurance on new debt and other steps in the last two months support GE’s AAA credit ratings, dividend payment and liquidity, Chief Financial Officer Keith Sherin said in an interview.

“Everything we’ve done from mid-September until today has been to strengthen our profile,” Sherin said today, after the Fairfield, Connecticut-based company’s shares hit a 12-year low and later rebounded. GE is sticking with its Sept. 25 plan to keep the 2009 dividend the same as in 2008, the company repeated earlier today.

GE, whose bonds carry the highest available AAA rating, yesterday said the U.S. government agreed to insure as much as $139 billion in debt for lending arm GE Capital Corp. That figure includes $88 billion in commercial paper the company had outstanding at end of September. GE intends to issue “nowhere near” that amount of long-term debt, Sherin said.

GE, whose market value has dropped 55 percent this year, rebounded today from the lowest price since 1996 after the company reiterated its dividend plan and said Chief Executive Officer Jeffrey Immelt bought shares in a show of faith. It rose 57 cents to $16.01 at 4:15 p.m. in New York Stock Exchange Composite trading after earlier falling to $14.58.

FDIC Insurance

GE has $43 billion in long-term debt maturing in the nine months ended June 30, most of which is eligible for the insurance under a newly expanded Federal Deposit Insurance Corp. program, Sherin said. The $139 billion insurance cap also includes the $88 billion in commercial paper, or short-term debt, in its calculations.

The cost of insuring that debt, at about 75 basis points but yet to be finalized by the FDIC, will be outweighed by the reduction in spreads, Sherin said.

“Our borrowing costs are more than offset by the charges that we give to customers for lending the money,” he said. “This removes any potential doubt about our ability to issue long term debt next year.”

Long-term debt issuances are now planned be even lower than the $60 billion currently forecast next year, he said.

In October, GE agreed to sell its commercial paper, the short-term funding companies use for daily operations, to a Federal Reserve facility created to help unlock credit markets, and the insurance is backup to that. The use of the government programs helps GE regain its competitive position, he said.

“We were put at a disadvantage on a relative basis when bank deposits and money market funds were guaranteed and asset- backed commercial paper was accepted by the Fed as collateral,” said Sherin, 49. “This puts us on an even playing field.”

Shrinking GE Capital

GE Capital, the company’s finance arm, will focus on “core units” including middle-market lending and financing large industrial businesses that include jet engines, power-plant turbines, health-care equipment and locomotives, he said.

Detailed plans will be unveiled in December when the company holds its annual meeting with investors, Sherin said. GE plans to shrink the size of the finance units to less than 40 percent of total profit and sales, down from about half last year.

“We do have a plan to reduce the size of GE Capital,” Sherin said. “Our plan is based on an assumption that the capital markets remain challenging. We can manage our collections and originations to over time reduce the size,” he said. “We’ve got a core of GE Capital that is very attractive businesses that we’re going to invest in.”

Finance Divisions

Under GE’s business model, the finance divisions give the parent company a percentage, or dividend, of cash generation that’s redistributed to all of GE’s businesses. In September, in addition to ending the buyback program and keeping the stock dividend paid to investors next year at 2008 levels, GE also slashed that percentage payment to 10 percent from 40 percent.

GE is now planning to be able to increase the percentage above 10 percent in 2010, Sherin said. That in turn will bolster the company’s position to keep paying the dividend in 2010.

“Even if we just had industrial at the same level as 2008, that cash flow is in excess of the dividend,” Sherin said. “And in 2010 our current capital plans raise the Capital dividend again and even further support the shareholder dividend.”

GE Capital’s real estate unit isn’t writing any new equity- based contracts and is letting some areas, such as mortgages in countries like Australia, run off. The company won’t sell assets at prices below what GE thinks they are valued, he said.

Commercial Paper

The company still expects to bring down commercial paper outstanding below $80 billion by the end of this year and it may be reduced below $75 billion next year, he said.

The shares started recovering today after Immelt and another top executive disclosed they bought stock today. Immelt purchased 50,000 shares to show his confidence, said Russell Wilkerson, a company spokesman.

Immelt paid $16.41 to $16.45 a share, GE said in a U.S. Securities and Exchange Commission filing. Vice Chairman Michael Neal also bought 50,000 shares at $14.99 each.

The company pays a quarterly dividend of 31 cents a share, or $1.24 annually. The dividend has an indicated yield of about 7.3 percent and costs about $12 billion annually based on the number of shares outstanding.

To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net

Last Updated: November 13, 2008 17:54 EST