General Electric Thinks These Are 3 of Its Biggest Risks

1. Restructuring

1. RestructuringGE is huge. In fiscal 2014, it pulled in $148.6 billion in sales.

But it wants to be smaller. The company is currently trying to sell off “non-core” assets to focus on its industrial roots.

1. RestructuringUnfortunately, GE is so big that it faces two major restructuring risks:

1. Limited customers – Some of GE’s units (especially GE Capital ones) are so big that finding competitive buyers can be difficult.

2. Regulators – If GE can find a buyer, its massive sale might tip monopoly alarms. In July, U.S. regulators rejected GE’s $3.3 billion sale of its appliances arm, since it would’ve boosted the buyer’s U.S. market share to 26.5%.

2. Pension Plans

2. Pension Plans

GE relies on the talent of 305,000 employees across 175 countries, and cites salaries as one of

the most significant operating uses of its cash.

2. Pension Plans

GE currently has 609,000 pension plan participants on its books, costing the company $4 billion for fiscal 2014.

On a GAAP basis, GE’s pension plan was underfunded by $15.8 billion at the end of 2014, and an additional

unfunded plan had benefit obligations of $6.6 billion.

That’s major money, and investors will want to keep a close eye on where these plans head in the years to

come.

3. Dodd-Frank Act

Emerging from the ashes of the Great Recession, this act is meant to keep financial companies from taking oversized risks. While its primary target is big banks, General Electric might just

qualify.

3. Dodd-FrankGE is in the process of selling off its GE Capital unit.

3. Dodd-Frank

The Dodd-Frank act has targeted GE Capital as a “systematically important financial institution,”

meaning that it will face new regulation and increased scrutiny in the years to come.

3. Dodd-Frank

The SEC is giving GE an additional 3 years to get GE Capital split up and off its books, since the company intends to sell off this financial giant

(and is making good on that intention, bit by bit).

But selling $500 billion worth of assets can be difficult, and if GE doesn’t deliver on time, it will

face serious costs and consequences.

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