By Ted Mann
General Electric said it would be willing to sell off
intellectual property to secure regulatory approval for its $17
billion deal for Alstom SA's power business, but said concessions
around the French company's service business aren't an option.
The comments by Chief Executive Jeff Immelt were the most
specific yet about what GE would and wouldn't concede as a European
regulators continue to review the deal announced more than a year
ago.
The standoff pits European concerns about concentration in the
power market against Mr. Immelt's efforts to reorient GE around its
industrial roots and financially struggling Alstom's need to secure
a buyer for the assets.
GE has chafed at the protracted review period, which recently
was extended to Aug. 21. Mr. Immelt and the chief of GE's power
business, Steve Bolze, have said that the uncertainty of the
regulatory review is hurting Alstom's prospects, noting that sales
and earnings for the French business have dropped in recent
months.
"The processes in Europe put this company in play for 15 months
and that's tough on a business," Mr. Immelt told investors at the
Electrical Products Group Conference in Longboat Key, Florida. Even
so, he expressed confidence approval would come.
Mr. Immelt's presentation was heavy on details about the Alstom
deal, a central piece of his strategy to return GE to its
industrial roots. In it, he announced that GE has more than doubled
the amount of money it believes it can wring out of the combined
business over five years to $3 billion. The bulk of that additional
value will come from measures like shrinking the footprint of
factories and cutting overhead like sales costs.
Potential revenue from servicing Alstom's installed base of
power turbines is a coveted part of the deal for GE. In taking over
Alstom's service business, GE said it would also acquire a unit
that has the capability to service not only its own machines but
also those made by Siemens and Mitsubishi Heavy Industries Ltd.,
offering the potential to reap profits for years from power plants
across Europe, Asia and Africa.
Meanwhile, Mr. Immelt said the company has been inundated with
interest in the financial businesses it put up for sale last month.
GE has received more than 450 inbound inquiries for those
businesses, and Mr. Immelt said the company will be able to sell
off all of what is on the block by next year, faster than its
previous forecast of 2017.
By the end of June, GE will sign deals to sell between $20
billion to $30 billion in finance assets beyond what the company
has already announced, Mr. Immelt said.
In the years after the financial crisis, GE has been pulling out
of the finance business and plowing money into its new oil and gas
operation that has been recently been hit by the downturn in crude
prices. Mr. Immelt said GE now expects its profits in the business
to fall by 5% to 10% in 2015, though he said half of that effect
can be blamed on foreign exchange rates, not the slumping price of
oil.
Write to Ted Mann at ted.mann@wsj.com
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