GE to move consumer finance unit to London

Discussion in 'Wall St. News' started by andrasnm, Feb 12, 2008.

  1. In another blow to U.S. pride and corporate tax revenue, the conglomerate is packing up its consumer-finance division from its current Stamford, Conn., headquarters and sending it to London, England. But can the unit flee its problems?

    GE Money, as the unit is known, has had a rough year, with $2 billion in write-downs because of subprime lending and Japanese consumer lending. It exited the Japanese business, but had to struggle with the fact that delinquencies were up 0.59 percentage points, to 5.5%, in the U.S. business. The unit’s delinquencies outside the U.S. are flat with last year, executives told analysts.

    The unit may just be looking to play to its strengths: the newly appointed president of the group, William Cary, previously ran the unit’s relatively successful operations in Europe, the Middle East and Africa. As the U.S. portion of the business suffered–-and may suffer further from an impending recession–surely GE expects more revenue from a fast-growing area of the globe. In fact, the unit has had double-digit growth in Europe and Asia.

    Whatever GE Money’s troubles, it is a bitter pill for Americans to swallow that the unit is moving out of the U.S. This isn’t the old debate about outsourcing some back-office jobs to India or China; when an entire business this size moves, it is a question of whether the U.S. is still a good place to do business.

    And that, in turn, brings up all those awkward questions raised by the Committee on Capital Markets regulation and Treasury Secretary Hank Paulson about whether U.S. laws are too stringent. Congressman Vito Fossella, a Republican from Staten Island, captured the self-flagellation that will surely ensue from the move, especially if it becomes a trend.

    “While U.S. securities laws and investor protections make our markets the deepest and most liquid in the world, we must meet the challenges from overseas with the same ingenuity and creativity that has defined America for more than two centuries. GE’s announcement should serve as a call to action for U.S. policymakers to improve the regulatory and legal environment here to ensure the United States maintains its position as the world’s financial center.”