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February 06, 2009 – Comments (5) | RELATED TICKERS: GE , JNJ , XOM
General Electric (NYSE: GE) CEO Jeff Immelt now says that he's "prepared to run the company as a double-A". That looks like he's climbing down from his comments last month that the company remains committed to maintaining its triple-A rating. Of course, it's not entirely in his hands; ... [more]
Ludicrous. Any info on how much cash they'd need to come up with if they got downgraded?
I kind of take credit ratings with a grain of salt now. They are always "reactive" not "predictive." And ask all those investors who lost their shirts relying on them
The obvious downside to a ratings cut would be increased cost for borrowing. Now if that increased cost, while maintaining the dividend, puts the company in the red then decisive action needs to be taken. But to me Immelt's ultimate credibility is on the line now. He stated over and over that the dividend will hold for 2009. While future circumstances may warrant changed policy, nevertheless ANYTHING he says in the future, should he cut the dividend accordingly, can never be taken at face value anymore.
It's a tough call. I really think the rating was getting cut to some degree whether or not they kept the dividend or not. They've reduced the amount of GE capital's commercial paper substantially and have a good amount of cash on hand. If they can further reduce the commercial paper level (suppossedly around 60 billion now) I think they can shore up their balance sheet.
I think awallejr's right too Immelt is facing a crediblity issue. They've basically come out and said the next dividend payment will be the same but they put some language in the statment that leads me to think they're seriously going to consider cutting it for the second half of the year.
As a GE shareholder I'd definitely prefer the dividend... but if they could honestly cut it in half at this level and it'd still be fairly attractive.
I understand the allure of that dividend. But I don't see how anyone can believe in a company who's long-term business model seems to be increasing their debt in order to pay fat dividends over the next few quarters. They bought BILLIONS of stock back at $30+ dollars a share.
On top of that, he said the dividend is safe for 2009 recently. Now they say it's safe for the first half, then they'll "re-evalute". How much credibility does GE have left?
To be clear, I'm not blaming Mr. Immelt for GE's debt-laden balance sheet. That was Welch's blueprint. But I would never wanna own a company that operates that way, except for a trade maybe.
I definitely agree with you on credit ratings awellejer. Same with stocks imo.
Jeff Immelt and Socialization
I hate to say it folks, especially with the market's late false-confidence over PR'd non-socialization talk, but the banks are gonna be socialized, once and for all.
http://pascalsdog.blogspot.com/2009/01/jeff-immelt-describes-radical-new.html
Go check it out on my blog. On the eve of President Obama's inauguration the CEO of the "parallel to America" company General Electric, i.e. Jeff Immelt, said that, "We better get used to it. The banks are going to be socialized. This is the new future of America and also the rest of the world."
Anyway, I found the video on Hulu and have posted it here: http://pascalsdog.blogspot.com/2009/01/jeff-immelt-describes-radical-new.html for everyone to be able to see. The only play on the banks is to short them to Zero.
That is the exclusive live clip, a fifteen minute interview Immelt gave on MSNBC on January 19, 2009, detailing how how he was convinced the banks would be nationalized. And you know he has some insider information.
Believe me it knocked my socks off and has been the single biggest determinant of my view on the market since then.
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