GE Targets Too-Big-to-Fail Bid in March After Closing Dealsby
Company to complete finance asset sales first, CFO says
Industrial giant seeking to escape costly regulations
General Electric Co. is targeting a March application to exit “too big to fail” status, after the manufacturer wraps up a pair of key U.S. deals.
GE is poised to close the sale of $30 billion in commercial lending assets and unload a Utah bank charter, GE Chief Financial Officer Jeff Bornstein said in a telephone interview. The company then plans to ask authorities to exit the ranks of systemically important financial institutions, a label that brings added -- and costly -- regulatory scrutiny. GE hopes to begin the process before the quarter ends, he said.
“Those are the two big milestones that we feel like we need to get over before we formally send in the request,” Bornstein said after GE reported fourth-quarter sales short of analysts’ estimates. The steps will get GE’s “U.S. presence to the point where de-designation makes enormous sense.”
Shedding the tag is a crucial step in Chief Executive Officer Jeffrey Immelt’s sweeping plan to back GE out of the banking industry and renew its focus on making oilfield equipment, locomotives and jet engines. The company closed more than $100 billion of finance-asset sales last year as it worked to unload the bulk of the GE Capital lending unit.
GE fell 1.2 percent at the close in New York, the second-biggest decline on the Dow Jones Industrial Average.
Deals for the remaining U.S. assets to be sold are in progress, Bornstein said. “Some of them are close to signing deals, some are in the midst of negotiations,” he said.
GE unveiled the finance overhaul in April, pledging to unload $200 billion of assets while retaining only the lending businesses that support the company’s manufacturing operations. Investors had soured on GE Capital, which was so large it endangered the parent company during the financial crisis.
The company reached an agreement in October to sell $30 billion of North America lending businesses to Wells Fargo & Co. Bornstein said the transaction for U.S. assets should close in early March. A separate deal with Goldman Sachs Group Inc. that includes the Utah charter will close “shortly,” he said.
GE expects $3 billion to $4 billion of asset sales in its manufacturing units this year, the company said Friday. GE probably won’t sell anything larger than the home-appliances business it agreed to divest last week in a $5.4 billion deal with China’s Qingdao Haier Co., Bornstein said.
“We’ll continue to trim off small pieces of the industrial portfolio where we just don’t think it makes sense for us to continue to invest,” he said.
GE on Friday reported fourth-quarter sales of $33.8 billion, missing the $35.9 billion expected by analysts surveyed by Bloomberg, as the company contended with a sluggish global economy. Adjusted profit was 52 cents a share compared with analysts’ average estimate of 49 cents.
“We’re seeing a lot of economic volatility but there’s still enough business out there for GE to hit its goals,” Immelt said in a conference call with analysts.
(An earlier version of this article was corrected to clarify that the Federal Reserve isn’t the sole arbiter of too-big-to-fail status.)