GE’s Sprawling Empire

By Ricky McRoskey

Will they stay or will they go?

That’s the question surrounding several of General Electric’s (GE) business segments as the tough economy forces the beleaguered industrial conglomerate to reshuffle some of its major operations. On July 10, the 130-year-old company announced it will unload its $17 billion Consumer & Industrial arm, which makes everything from lightbulbs to dishwashers. GE’s credit-card business has been on the block for months.

Since taking the helm, CEO Jeffrey Immelt has shed more than $55 billion in businesses only to acquire $88 billion in new assets, particularly in higher-growth, high-tech areas. What could be Immelt’s next move?

BusinessWeek ponders the outlook for GE’s six major businesses.

GE Infrastructure

Sales: $57.9 billion

GE’s Infrastructure division is on solid ground. The company’s biggest segment, which pulled in more than one-third of overall revenues last year, makes everything from wind turbines to oil drilling equipment. With broad exposure to infrastructure-hungry emerging markets, the division saw earnings rise 24% to $3.2 billion in the second quarter and just unveiled an efficient propeller-driven engine for airlines struggling with soaring fuel prices. GE’s core infrastructure bulwark will drive its earnings for a very long time.

GE Commercial Finance

Sales: $34.3 billion

The finance division, which lends to businesses seeking to buy everything from industrial equipment to real estate, was a key reason GE missed Wall Street estimates by ¢ per share in the first quarter. The size of this unit is likely to shrink from its current stake in GE’s portfolio. There’s good news for the unit, though. Last week, after reporting commercial finance profits jumped 7% in the second quarter, GE stressed its financing unit doesn’t need the cash lifelines that many of its banking peers do.

GE Money

Sales: $25 billion

It’s tough to sell loans during a credit crunch. That’s at least what GE’s retail lending segment is learning now, as it looks to unload some of its debt in mortgages and credit cards. In the second quarter, credit delinquencies for GE in North America rose 105 basis points to 5.55%, bad news for a division that is trying to sell its $30 billion credit-card business, which issues cards for retailers including Chevron and Lowe’s. In December 2007, the segment sold WMC, its U.S. mortgage business, for $117 million, and last week sold off its Japanese mortgage loan business at a price that analysts thought was favorable‚ $5.4 billion. With second quarter profit falling 9%, look for GE to reallocate some of its exposure to consumer lending into commercial finance.

GE Healthcare

Sales: $17 billion

Investors were watching this underperforming unit very closely before second-quarter earnings alleviated some of their fears. The division, which manufactures medical equipment like X-ray machines, saw profit jump 8% and revenue increase 11% in the second quarter‚ after a 17% drop in profit the previous quarter. That’s a sign the division, which Immelt ran before becoming CEO in 2001, is on much better footing.

GE Consumer & Industrial

Sales: $17.7 billion

The days are numbered for GE’s trademark industrial unit. Last week the company announced it will spin off the lightbulbs-to-refrigerators-to-dishwashers division, which is struggling mightily as consumers eschew large-scale home purchases. Second-quarter profit for the segment fell 55%, prompting management to unload the business that Thomas Edison launched back in 1878.

NBC Universal

Sales: $15.4 billion

GE and NBC have both maintained that the struggling media giant is not for sale, but that hasn’t stopped investors’ perennial speculation that GE won’t keep it. With a scant 1% profit growth last quarter, NBC fell short of GE’s profit expectations, although some of the lagging stemmed from the writers’ strike. The Summer Olympics should give the network’s ratings a temporary boost, but the smallest of GE’s six segments by revenue will probably continue to invite speculation of an eventual sale.