Imagining a Smaller GE Capital (NYT)

Imagining a Smaller GE Capital
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, Reuters Breakingviews suggests. 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, Reuters Breakingviews notes.

If it were possible for Mr. Immelt to hit the reset button on GE Capital, Reuters Breakingviews says, 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.

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