GE to shed financial services arm in return to industrial roots

US conglomerate to spin off GE Capital in attempt to improve investor returns

The move to sell GE Capital marks a significant break from the model inherited by General Electric chief executive Jeff Immelt. Photograph: Goh Seng Chong/Bloomberg

The move to sell GE Capital marks a significant break from the model inherited by General Electric chief executive Jeff Immelt. Photograph: Goh Seng Chong/Bloomberg

 

General Electric launched a radical plan to dispose of most of its financial services operations and return to its industrial roots, in one of the biggest shake-ups in the 123-year history of the US conglomerate.

Jeff Immelt, who succeeded Jack Welch as chief executive more than 13 years ago, announced GE would sell or spin off most of GE Capital, the division that dragged GE into trouble in the financial crisis but still provided almost half the group’s earnings in 2013.

His attempt to improve investor returns boosted GE’s shares more than 8 per cent on Friday but follows years of criticism of stock underperformance. Under Mr Immelt’s tenure GE’s share price has fallen nearly 30 per cent, while the S&P 500 index has risen 93 per cent and shares in leading competitors Honeywell, United Technologies and Siemens have doubled.

The move marks a break from the model Mr Immelt inherited when he took over from Mr Welch. Mr Welch, who has been critical of his successor, told CNBC: “It looks like a smart move and right for the changing financial landscape.” The only financial operations to be retained will be the leasing operations directly tied to GE’s manufacturing businesses.

– Copyright Financial Times Limited 2015