Chris,
from GE's CEO on Asia. Now, when Asia gets liquidity, what products they will produce the most to flood our markets here and Europe ?
Euro Markets: Recent Remarks by GE's
Jack Welch Reflect Building Concern
About Asia
By Ned Stafford
Special to TheStreet.com
6/25/98 2:49 PM ET
FRANKFURT -- Jack Welch, the head of General Electric
(GE:NYSE), in a recent presentation to institutional
shareholders in London described the Asian financial crisis
in extremely bleak terms, saying that the region's problems
will contribute to making 1999 a tougher year than 1998.
Welch has, in the past, made frequent comments about the
difficult global pricing environment and the difficulties faced
by Asian economies. In this year's GE annual report Welch
said the Asian trend toward economic growth is ultimately
"irreversible" and that means GE needs to take advantage of
the current crisis. Still, the dour nature of Welch's recent
comments surprised some institutional investors and
underscored that many top thinkers believe the Asian crisis
is far from resolved.
A GE spokesman in the U.S. said Welch's comments came
in response to questions asked about similar negative
comments concerning Asia made earlier by England's Prime
Minister Tony Blair and quoted in London's Financial
Times. "Mr. Welch was simply agreeing with those
comments," the spokesman said.
A report to clients from Dresdner Kleinwort Benson, dated
June 17, described Welch as "very pessimistic" at the
London presentation and indicated that Welch believes the
worst is yet to come. According to the report, Welch said
that although Asia seemed to be stabilizing in March/April,
things have fallen back sharply since. He said that the big
issue in Asia was lack of liquidity for manufacturers, which
has kept the full effects thus far from spilling into the U.S.
and Europe.
According to the report, Welch said the ailing Asian
companies will -- at some point -- get the liquidity they need
in order to start building and exporting products more
aggressively. When that happens, these companies will
swamp world markets with low-priced goods, creating a
nasty pricing environment. He noted that if GE provides
Korean companies with liquidity, it can get almost any
product it wants at a 50% to 60% discount, the report said.
As a result GE is, among other things, holding back on its
push into Mexico (for low-cost supply) in 1998, the Dresdner
report said.
The author of the Dresdner Kleinwort Benson report, Colin
Fell, when contacted by TheStreet.com, said that Welch
made his comments to institutional shareholders of GE. Fell
would not say specifically when the comments were made,
saying only within the past two weeks.
In his presentation, Welch said that there was no doubt that
the U.S. economy was now slowing, adding that he doesn't
see evidence of the 3%-to-4% growth indicated by macro
statistics. Concerning European growth, he has seen some
moderation of recovery in the past couple weeks, the report
said.
Welch reiterated recent comments, saying that he doesn't
expect any GE businesses to successfully increase prices.
He expects pricing problems to get worse, adding that he
isn't looking forward to 1999, which he expects to be a more
difficult year than 1998, the report said.
Welch said GE's response is to implement its policies even
more aggressively and to focus on globalization, service and
Six Sigma, the report said. He said net benefit from Six
Sigma, a productivity enhancement program, is expected to
be $750 million in 1998. |
