Lots Of Reasons To Be Optimistic

The Age

Saturday March 29, 2008

Leonie Wood

WE HAVE strict risk discipline, and as a result, have no exposure to losses from collateralised debt obligations (CDOs) and structured investment vehicles (SIVs). We have retained a "triple-A"-rated balance sheet and generate substantial cash flow, so we can invest while others pull back.

I have managed businesses through one recession in Australia, two recessions in the US and one in Europe, but this downturn is very different.

Despite it being largely related to the financial capital markets, it is the worst I have seen in 30 years of business.

Out of the last "bubble" (1999-2001), a few great companies/industries have emerged like Google, Yahoo!, etc. I don't think we'll see the same again. I think the changes will be more dramatic and will hurt more, especially in the US.

Australia can take some solace in the fact that we have a strong economy, which is more resilient than most. In fact, it's one of the reasons GE has continued to invest in growing our business in Australia and we now employ about 7000 people here.

Times like these are when GE typically outperforms the market. Our financial services businesses grow faster in this type of volatile market.

We have not changed our plans. We are continuing to invest. In fact, one of the bigger challenges is that we have so many terrific opportunities to pursue as our competitors are divesting, it is a challenge to prioritise the opportunities. In chaotic situations there are always great opportunities.

In our financial services businesses our cost of funds has gone up. But because we are AAA-rated, the increase in our cost of funds is less than our competitors.

Some competitors are having difficulty getting access to funds and hence "pulling back" on investment. Because of our strength we are able to continue to invest. I don't think we will start to emerge from this difficult market environment until 2009.

Hospitals don't stop ordering MRIs, ultra-sounds, CAT scans. Energy companies have not stopped ordering power generation equipment. Our wind turbines are in high demand. The mining companies have not stopped ordering gas-powered generating equipment or locomotives. The need for our water products, desalination capabilities, reprocessing technology and capabilities continues to grow unabated.

We are very optimistic. I am leading with a lot of confidence in our company and in our people. -- LEONIE WOOD

© 2008 The Age

Back to News Index | Back to Home