GE’s weaker view better than none

Sep 30, 2008

CEO gets bonus points for long-term outlook

GE, which has a large financial services business hit by the credit crunch, was in the unfortunate position of revising down its 2008 guidance last week. Yet its stock wasn’t punished as much as it could have been.

That may be because CEO Jeff Immelt took pains to emphasize the long view for the company: $70 bn available in long-term financing, a commitment to maintaining a triple-A rating and a suspension of a stock buyback to shore up the balance sheet, among other things.

‘At the end of the day, there was a positive reaction to the GE news,’ says Dean Krehmeyer, executive director of the Institute for Corporate Ethics, part of the Business Roundtable, commending the company for ‘additional clarity into a number of different market segments’ in a webcast featuring both the CEO and CFO.

By pairing the bad news with a reiteration of confidence in its own business model ‘and how it functions in good times and bad’, GE weakened the blow, says Krehmeyer. The credit crisis ‘presents exactly why there should be a much greater focus on long-term value creation,’ he adds.

By Janine Armin