Speaking of starts, the funniest GE story I've seen recently was from the AP: "GE Capital outlook improving, losses to continue".
For shareholders that headline is uncomfortably close to the famous quote "The beatings will continue until morale improves". Coming into today's "Annual Outlook" meeting, the stock is trading down 11 cents at $15.84.
Imagine that Jeffrey R. Immelt, chief executive of General Electric, could remake the conglomerate’s troubled finance unit, GE Capital, from scratch. Ideally he would narrow its focus to businesses related to G.E.’s core industrial strengths — and the size of its balance sheet to about $360 billion in assets. Imagining, though, illustrates just how difficult it will be to tame GE Capital to a manageable size.
Mr. Immelt has already taken out the hatchet. But his aim of chopping GE Capital’s balance sheet down from $631 billion, by about a quarter across most areas, is going to take time. He has 2012 in his sights to achieve this ambition — something he is likely to reiterate at his annual investor presentation Tuesday. That could seem an eternity to investors who have seen the company’s market value shrink by more than $240 billion since the credit crisis erupted.
If it were possible for Mr. Immelt to hit the reset button on GE Capital, it is not difficult to see what would disappear first: commercial real estate. The market for office properties and securities is in a shambles, and GE Capital, as both lender and landlord, is heavily exposed. The company recently raised to $7 billion its estimate of unrealized losses on underwater properties. The trouble is that most experts predict that asset values for everything from apartment buildings to skyscrapers have further to fall.
A GE Capital without its current real estate portfolio would be $78 billion lighter in assets, according to the company’s latest quarterly filing. There would also be other benefits. The company would save the incalculable management hours needed to clean up the current mess. It would also help simplify GE Capital’s portfolio, helping to woo back G.E.’s stock investors who have been turned off by the finance unit’s complexity....MORE