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[My name is Russell Wilkerson. ]
[I'm Director of Financial Communications for GE.]
[I'm here today with our Chairman and CEO Jeff Immelt. ]
[And, Jeff, I thought what we'd do today is just kind of cover the announcement on Friday--]
[just a little bit of the context--and maybe you can share with us ]
[some of your decision-making in that process. ]
[Maybe we can just start off with the first question.]
[Can you tell us what the board decided on Friday?]
[Yeah, Russ, we had announced last year that the board had approved]
[management's plan to have a quarterly ]
[dividend of 31 cents a share, which was even between 2008 and 2009. ]
[What we decided on Friday is to cut]
[that dividend from 31 cents per share per quarter]
[to 10 cents per share per quarter]
[starting in the second half of this year.]
[So investors will get the 31-cent dividend in the second quarter,]
[but at the beginning of the third quarter it will be ]
[10 cents a share for the second half of the year. ]
[you declared the second quarter dividend and]
[you said you'd evaluate the second half of the year.]
[Can you tell us a little bit about what changed from February 6, until Friday?]
[[R.W.] And then, just what you might do with the proceeds?]
[Sure, Russ, everybody understands]
[that we're living in just extraordinary, ]
[fast-paced times, so that the world]
[is very tough, the environment is very volatile,]
[and so the company has to continue to react in that world. ]
[The company remains strongly profitable. ]
[Our cashflow remains very strong,]
[even in a very difficult environment. ]
[But the board and the February 6, board meeting really]
[went through the process and said that we really should evaluate]
[capital allocation, particularly the dividend,]
[and they chartered management to do a study]
[over a specific time period. ]
[We completed that study, and we had a board meeting]
[on Friday to review our recommendations, and our recommendation]
[was to make the move from 31 cents to 10 cents a share. ]
[I think once management and the board reach that conclusion, ]
[we really owe it to our investors to be transparent and]
[to make that announcement, and that's what we did Friday afternoon. ]
[It really went after a long study of what the government's ]
[doing, what's going on in the environment, things like that,]
[then we took this appropriate action, I believe. ]
[[R.W.] Sure. How much will this save the company, or]
[give us funds, and how will it help the company going forward?]
[So, this will save roughly 9 billion dollars a year--]
[about 2.2 billion dollars each quarter. ]
[And what it does, it just allows us to have]
[more discretionary capital that we can use]
[to play defense, to put more capital inside GE Capital]
[to further strengthen its balance sheet just like we did]
[with the equity raise, and just like we've been doing ]
[Potentially, at some point, it gives us the opportunity to play some offense should the ]
[But the primary objective is to be safe, ]
[and we think this just creates a greater buffer ]
[of safety for our investors. ]
[Jeff, can you give us--tough year right now.]
[Everybody's going through a tough time.]
[The environment is extremely challenging. ]
[Can you share with us a little perspective on the company's historical perfomance, ]
[and maybe, as we look at the dividend, our]
[historical payout--what our record has been?]
[You know, Russ, I think--and this is something we bring out in the annual report--]
[if you track the company starting in the 1970s, ]
[and track it by decade--the cumulative]
[earnings in each decade and the cumulative dividend]
[paid in each decade--if you start in the 1970s, we earned]
[cumulatively 8 billion dollars.]
[We paid out about 4 billion dollars in dividend in the decade of the '70s. ]
[In the decade of the '80s, we earned about]
[25 billion dollars cumulatively.]
[We paid out about 12 or 13 billion dollars over the decade of the '80s. ]
[In the decade of the '90s, we earned about 65 billion dollars,]
[We paid out a dividend somewhat in excess of 30 billion dollars, in that decade. ]
[In this decade, including our projections for 2009, ]
[the company will earn 170 billion dollars cumulatively, ]
[in this decade, and will pay out a dividend,]
[cumulatively, throughout the decade of about 90 billion dollars. ]
[So this is a company that over]
[the last 40 years has really performed in each time period. ]
[We've continued to return money back to investors]
[And so that's the context I'd like investors to have]
[when they think about the dividend, when they think about what the company]
[stands for and how we're positioned]
[and how we will position ourselves for future growth. ]
[How did you decide to go to 10 cents?]
[Most people thought maybe half.]
[Why 10 cents? Why is that the magic number?]
[Did you consider taking it to zero?]
[All of us know the legacy of GE, and all of us want to be very]
[responsive, particularly to our retail investors, and continue this dividend. ]
[This is an important and momentous decision]
[What we wanted to do is get to a point on which]
[we could grow, that still provided our investors]
[with what we viewed to be a good dividend yield,]
[and provided ample capital for the company]
[to strengthen, again, our balance sheet, ]
[to play safe, and to have the ]
[opportunity to play offense should the opportunity present itself. ]
[[R.W.] Jeff, you said you have the cash]
[The announcement comes out last Friday that you're going to reduce the dividend.]
[Our industrial cashflow remains strong. ]
[We continue to model the business even in this tough environment. ]
[We would have sufficient cash to pay]
[We just didn't think it was the smartest thing to do on behalf of our investors]
[at a time period with all this financial]
[We just feel like this is the best move to make at this time,]
[and that's why we went forward with it. ]
[[R.W.] You've talked a lot about making the company more safe and secure, ]
[starting in the fall, a lot of steps you've taken.]
[Can you share with us a little bit more what that means, and maybe just review ]
[for the audience the steps you've taken and the leadership you've demonstrated?]
[So, I would say, since the crisis began in the middle of September,]
[we have reduced leverage in GE Capital.]
[We have put more capital in GE Capital. ]
[The equity raise we did in the fall, that's]
[where that capital went, into strengthening the balance sheet. ]
[We've reduced our commercial paper. ]
[We've improved our liquidity. ]
[We've raised about 65 percent of the debt funding we're going to need for 2009. ]
[Our commercial paper is likely below 60 billion,]
[on it's way to our 50 billion target for the year. ]
[So, we've strengthened the balance sheet, we've improved our liquidity, ]
[we've increased our reserve for losses, ]
[we've got more cash on hand, we've probably got close to 50 billion ]
[dollars cash on hand as we're running the company today. ]
[The annual report comes out tomorrow.]
[You have a letter to share owners.]
[Can you give us a little bit of a preview on what that letter says and what]
[you're saying about the company right now?]
[We're reflecting on the environment, the crazy 2008 we]
[I think we reflect on some things we learned, some things we]
[would have done differently had we had it to do over again in 2008. ]
[And then we really talk about how we're playing defense, ]
[how we're keeping the company safe in this environment, and, ]
[as importantly, how we're playing offense, how our infrastructure and]
[media businesses are positioned to play offense and some ]
[real cyclical advantages we think we have in services]
[and with some of the government stimulus projects.]
[We talk about the long-term strategy for GE Capital,]
[which is to really shrink the business]
[and generate more around the GE core.]
[We talk about driving the long-term strategy around]
[innovation and globalization and services and financial strength. ]
[And then we just reflect on what we learned and how this will be a ]
[better company as we go through this cycle. ]
[So I think it's an open, transparent, honest document]
[that our investors can really relate to]
[and hopefully build their trust and faith in GE. ]
[You purchased 50,000 shares in the open market today. ]
[Can you share with us your rationale, or what you see,]
[or what might be a benefit to shareholders out there?]
[Look, I'm a long-term buyer of the stock. ]
[I think the value today is exceptional. ]
[It's too good in some ways. ]
[Even with reduced dividend, I think the dividend payout is still very attractive. ]
[And the management team, myself included, is fully committed]
[to this company, to getting through this very difficult time.]
[This is one of the ways that I can say to investors ]
[that I'm all in, that we're kind of shoulder-to-shoulder with you,]
[and that we're executing a plan that's going to make this company better]
[We know it's tough to look at the Dow and the stock prices going down, and things like that, ]
[but management is in there with investors. ]
[[R.W.] In closing Jeff, what would you say to, either the retail investor, or the ]
[institutional investor who is sitting by?]
[There's lots going on with the company, a lot of changes, extreme volatility in the market. ]
[What's the reason to buy GE?]
[Look, I think we've got fantastic industrial businesses]
[and infrastructure in media that are long-term,]
[market-leadership-type businesses. ]
[Our financial service earnings--the company has gone ]
[from being worth probably 150 or 200 billion dollars]
[10 years ago to zero, or maybe less]
[Look, we've worked this, we've studied it, we]
[think we've taken appropriate action to strengthen this business,]
[to strengthen the reserves, and this is a franchise that's valuable. ]
[And right now, investors discount everything about ]
[financial services to a significant degree.]
[I just don't think it's appropriate with our financial service business. ]
[I think it's been hit too hard in this cycle, and ]
[the business is in much better shape than the world knows today. ]
