Wednesday, April 28, 2010

Growth Fueled More by Business Than Consumers

GE Sees Growth Fueled More by Business Than Consumers

April 28, 2010, 2:47 PM EDT


By Rachel Layne

April 28 (Bloomberg) -- General Electric Co. Chief Executive Officer Jeffrey Immelt said the U.S. economic recovery will be driven by more business investment than consumers as companies spend cash from flush balance sheets.

“The businesses are definitely getting better,” Immelt told reporters before the company’s annual shareholder meeting in Houston. “Consumers are going to be more conservative around debt levels. So to a certain extent the U.S. economy is going to have to be driven by business investment.”

Immelt has worked to stem loan losses and boost reserves at the Fairfield, Connecticut-based company’s finance unit while pouring resources into a more focused lineup of industrial businesses. Growth will be driven by emerging markets and recovery in developed economies, and the GE Capital finance unit is stabilizing, he said today.

“The clouds are breaking and the forecast ahead of us is promising” Immelt told shareholders.

GE, the world’s biggest maker of jet engines, power-plant turbines and medical-imaging equipment, repeated today that earnings may improve enough later in the year that the company can raise its dividend in 2011. In the first quarter of 2009, GE cut its dividend for the first time since the Great Depression to preserve cash and shore up the finance division.

The company sees growth coming from emerging markets such as China, where it garnered $6 billion in sales last year, including about 40 percent from goods exported from the U.S. Immelt said he plans to hire more workers in the U.S. this year.

Available Cash

GE Capital’s performance should “snap back” starting in the current quarter and continue to improve in the rest of the year, Immelt reiterated. GE previously projected the unit’s earnings would be little changed from last year.

The commercial real estate unit, a major concern for investors, is stabilizing, GE Capital CEO Michael Neal said in an interview before the meeting.

“We’re in 35 countries. I would say it varies by ZIP code. The thing that has been our biggest concern has been the United States, Japan second,” Neal said. “But I think everything today is better and is in a bottoming pattern. ”

Executives repeated projections that GE will have $25 billion in cash available to invest at the end of this year.

GE is one of the world’s most widely held stocks with about 10.7 billion shares outstanding. With 76 percent of the 8.1 billion eligible ballots voting, all six shareholder-sponsored proposals failed.