GEWatcher Update (4) GE Money Another falling star!!

As I emphasized, in my latest book, The Secret to GE's Success, GE is a strategic portfolio managed company. It is willing to take risks and is committed to GOING BIG AND GLOBAL. Unfortunately, this means that some parts of its risk profile succeeds and others fail.

One of GE's growth stars has been GE Consumer Finance, now called GE Money. The credit card segment has been a major part of its growth. Since credit card interest rates have been unbelievable and some say "unethical". GE and other credit card companies have prospered, but recently several things have grown wrong. Less than two years ago, GE moved aggressively into Japan offering credit cards and loans, at high interest rates. However, this changed quickly when the Japanese instituted limits on the interest rates, the delinquency rates increased and GE Money lost heavily on sub-prime. The results have included: GE announced it will sell its Japanese unit and take an after tax loss of $906 million, it is the process of trying to find a buyer for its credit card business, GE liquidated $3.7 billion of its sub-prime mortgages at a loss and the units CEO and one of the founders of the unit, retired early.

The art and science of strategic thinking requires that leaders and their organizations anticipate change and take these potential changes into their strategic investments and resource allocations. Nothing lasts forever, especially if it is very positive. Obviously, these skills have declined at GE and the company has has number of negative surprises.

Bill Rothschild, author of the first book on strategic thinking and decision making, Putting It All Together- a guide to strategic thinking and decision making. This book was updated in 2002 and is used in many executive and MBA programs and is available on http://www.strategyleader.com/. This book describes the type of thinking required to avoid surprises and potential profit declines.