Articles on Gary Wendt and GE Capital:
From The Nightly Business Report
an Interview with Gary Wendt of GE Capital
sixsigmaqualtec.com
The Nightly Business Report Transcript—an Interview with Gary Wendt of GE Capital
Susie Gharib:
Gary Wendt runs the profit engine that brings good earnings
to life for General Electric (NYSE:GE). It's called GE Capital and does business
around the world. Darren Gersh asked Wendt about the world economy and cutting
costs in the service sector. It's part of the Business Week CEO Summit, the new rules,
mastering the challenges of a new economy.
Darren Gersh, Nightly Business Report Correspondent:
I think a lot of investors would be
surprised to learn that GE Capital supplies about 40 percent of GE's profits.
What is GE Capital? And why is it so important to GE?
Gary Wendt, Chairman & CEO, G.E. Capital:
Well, I think the answer to both of those will help any viewer who doesn't know that
GE Capital provides 40 percent of the profits to General Electric.
But that it does so through a whole range of activities that really doesn't put
us in that category, called financial services, for instance. Now we operate in these satellites.
Financial services? No, probably not. The yellow trucks that you see going down the
road that say Penske on them. Those are really a part of GE—GE Capital.
So we do a lot of things.
Yes, we finance things so we're in financial services.
But we do a lot of other things, as well.
The point is, don't think of us as a financial services company.
Our multiple deserves a lot more.
Gersh:
Well, in the course of your business, you deal with thousands of companies
around the world. You know a lot about them.
Do you see any signs of a global recession right now?
Wendt:
As of now, it's still isolated to places that we all know very well.
We know about Russia. We don't have a thing there so, so it's not of any concern to us.
In Asia, we had very small investments, minor concern. And they're clearly having deep
recessions in Korea, Indonesia, Thailand. But when you put those things together,
that isn't very much of the world's economy. I mean, places like Mexico.
It still has a good economy. People are worried about Brazil and Argentina.
Economies going along just fine. I was in Eastern Europe and checking on our
activities in Poland, the Czech Republic, and Hungary, and they say things are
going just fine. Obviously, there's a lack of an inflow of new capital, because people
are watching. But as far as their consumers and their banking activities,
delinquency in our portfolios, all just fine.
Gersh:
Well, you've seen opportunities in Japan and you've been making
acquisitions there. Why, and what are you buying?
Wendt:
Japan is an opportunity because it's the second largest economy in the world.
And until very recently, we haven't been allowed to participate.
That's all you have to know. Even if their economy isn't too good,
the chance to go in and participate for the first time is just exciting.
Gersh:
Well, what can you buy now that you couldn't buy a couple of years ago?
Wendt:
We have been able to buy finance companies that provide consumer loans.
We've been able to buy the infrastructure of an insurance company that will provide
savings products. And we are talking, and this has been announced that we're talking,
and that's all we're doing at this point, trying to buy a business that finances commercial companies.
Gersh:
What if the United States does slow down?
If the United States dips over into recession, can GE Capital keep growing at 15 percent a year?
Wendt:
Yes, we'll be able to do that in the tough times.
Gersh: How?
Wendt: Well, because in tough times is when we find opportunities
—more and more opportunities. For instance, in Japan.
People think that's a tough-time economy today. For us, it's the best opportunity we've seen,
maybe in history. And those situations exist. So, people that continue to look for new things
to do aren't going to have a problem. If you're doing the same thing you always have,
and people want less of it, it's obvious you're not going to do so well.
Gersh:
One last question. I understand that G.E. Capital is now applying
the efficiency principles that GE has used in its manufacturing
businesses to services. What results have you had there?
Wendt:
We're having success and basically just getting started in doing that because,
because at the surface of the 6-sigma activity is a need for everyone to be involved,
which is called culture. You know, everyone, if six of the people want to do things better,
but the seventh doesn't and they're in the process, it's not going to get any better.
So a part of what we're going through all over GE now is the cultural change to get
everybody bought in. And the training change so that everybody expands.
Now we've had some early hits. I mean, we can process a credit card now 30 percent faster
than we ever could before because of the 6-sigma activities. Ten years from today,
the list we'll have to give you about the things we do better will be much longer than you want to listen to.
Gersh:
And a billion dollars in savings?
Wendt:
Billion dollars in savings, for us, over the next three years.
Gersh: Mr. Wendt, thank you.
Wendt: You're welcome.
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From Slate:
" GE: Dressed for Succession "
slate.msn.com
GE: Dressed for Succession
By James Surowiecki
Posted Thursday, Dec. 10, 1998, at 7:20 a.m. PT
Gary Wendt's resignation as head of GE Capital points up perhaps the most important thing
about GE's success over the years: its careful management of succession.
In 12 years at GE Capital, Wendt transformed that division from a small credit arm with assets of $24 billion
into what effectively was one of the world's largest banks,
embracing 29 different businesses and controlling $300 billion in assets.
Wendt's aggressive investing style and managerial style allowed the division to account for 40 percent of
GE's overall profits, and provided the kind of internal diversification that almost no large company has anymore.
And yet his departure provoked no crisis among GE investors or within the company.
That's because GE has created a corporate culture where the company really
is larger than the individual. That may seem like an odd thing to say when
GE's public image is so connected to that of its CEO, Jack Welch, who's often
heralded as the man who saved the corporation. But while Welch did transform GE
in the 1980s, cutting jobs while dramatically improving productivity, he did so not to
"save" the corporation but rather in anticipation of a newly competitive business world.
When Welch took over GE, the company was in fine shape. His predecessor had
actually just been named CEO of the Year in a Gallup Poll (who knew they took
Gallup polls about topics like that), and had spent seven years planning for his own succession.
More than that, as James Collins and Jerry Porras point out in their book
Built to Last, essentially every GE CEO has been successful. GE's return on equity
under Welch has been stellar, but by the company's historical standards not outrageous.
The company's emphasis on ensuring that top managers are developed in-house and
groomed for the top--often through a fiercely competitive process--has ensured that
no one sits in the CEO's chair who's suddenly going to announce that GE is going into the movie business.
In this context, the clearest signal Wendt's departure sends is that Wendt himself
was not a candidate for the CEO's job, which is unsurprising when you consider that
he's already 56 and that he and Welch are not the best of friends.
And while it may seem strange for a company to have one of its best performers
step down while he's still doing great work, GE's entire history encourages it to make
decisions early rather than later. Welch wants no chaos when he retires two years from now,
no conflicts over succession. He's installing a younger team of executives at the very top,
one of whom should be the next CEO. It's an unusual, and unusually successful, way of doing business
in these days when more and more corporations look outside for saviors. |
