#AceBreakingNews says this is courtesy of Rob Cox…

#AceBreakingNews says this is courtesy of Rob Cox – Author Reuters Breaking Views columnist. The opinions expressed are his own.
Can General Electric keep activist investors at bay? If the gates at Apple, Microsoft and Procter & Gamble can be rattled, complacency just is not an option for any company, even and maybe especially a $270 billion conglomerate. While GE’s broad strategy looks more coherent than ever, the Connecticut giant still has two potential vulnerabilities: its finance arm and its long-time leader Jeffrey Immelt.

Corporate America has learned of late that size offers no immunity from the braying of ornery shareholders. A $320 billion market value did not shield Microsoft from the pressures of Value Act Capital, which nabbed a board seat and accelerated the exit of Chief Executive Steve Ballmer. Even bigger Apple, and boss Tim Cook, have been targeted by both David Einhorn and Carl Icahn to return more cash to shareholders. A long-standing reputation as a consumer-products stalwart did not protect $220 billion P&G from the advances of Bill Ackman.

GE has so far kept clear. Its executives, however, seem to be cognizant of how quickly that could change. The engines-to-dishwashers manufacturer has been proactively restructuring in ways that could wisely head off rabble-rousers. GE is reducing its exposure to finance, and in recent years exited businesses like NBC Universal, deemed ancillary to a strategy focused on global infrastructure.

As a result, the existing configuration of GE’s industrial portfolio looks better positioned to take advantage of a middle-class future. That world, to put it simply, involves more people around the globe seeking better healthcare, travelling on jet planes and gaining access to clean water and abundant energy – from which they can run GE appliances.

So what would an activist investor go after at GE? The most obvious weak spot is GE Capital. During the financial crisis, the division’s balance sheet of some $550 billion overshadowed the world-class industrial businesses. The need to finance a large financial institution without a stable base of deposits stoked fears GE might even need to jettison valuable assets. GE Capital has since pared its balance sheet by almost a third.

There’s also more to come. In November, GE said it would begin the process of spinning off its consumer finance business, which carries some $59 billion of assets. Once the divestiture is completed, GE Capital will have a loan book of about $350 billion. That’s far below its peak. Yet it still puts GE Capital on a par with U.S. Bancorp and renders it among the country’s biggest financial institutions.

Some of this is easy to justify. About a quarter of GE Capital’s assets will be devoted to what it calls “GE Verticals” where it uses its balance sheet to help finance customer purchases of GE products. But it still envisions tying up more than half its assets in lending and leasing initiatives and some $50 billion in commercial real estate. To investors wanting a more focused, industrial GE, this could provide a potential soft spot.
Courtesy of Rob Cox – Author Reuters Breaking Views columnist. The opinions expressed are his own.

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#AceNewsServices says according to Fiona Maharg Bravo #Breaking…

#AceNewsServices says according to Fiona Maharg-Bravo – #Breaking Views
Will the shale boom ever reach Europe’s shores? It has had a remarkable impact in the U.S. Thanks to fracking, American chemicals and steel companies pay two-thirds less than European counterparts for natural gas, according to Eni, the Italian oil and gas firm. They pay half the cost for electricity. The International Energy Agency expects U.S. manufacturers’ share of global energy-intensive exports to grow slightly over the next two decades on the back of cheap energy, against a 10 percent decline in Europe. Thanks in part to the lower energy prices, the Boston Consulting Group reckons the U.S. will create up to 5 million factory and services jobs by 2020.

In theory, Europe could have cheaper energy too. It has vast quantities of shale gas, particularly under France and Poland. But there are problems. Europe’s shale layers are deeper, making it more expensive to extract than in the U.S. Difficulties have led Exxon, Talisman and Marathon Oil to throw in the towel in Poland.

There is also a lack of direct economic incentives. In the U.S., landowners share in the spoils because they own the subsoil. In Europe the profits usually flow to governments. This is no-hard-and-fast rule: fracking is banned in the state of New York and is thriving in Alberta where the subsoil is owned by the Canadian government. But social, political and environmental attitudes weigh more heavily in Europe.

It is more densely populated and that makes fracking more disruptive. Gas is released after blasting underground rock with explosives and pressurized water, sand and chemicals. That creates environmental concerns and understandable reticence by those who live near potential drill sites. In addition, water is hard to come by in certain parts, such as Spain. France has banned the practice.

It is too early to write off European shale gas reserves. U.S. exports of liquefied natural shale gas should also keep a lid on global gas prices, and that helps lower costs for Europeans. Old world economies can find competitive advantages in less energy-intensive industries. Gas is one of the less significant costs when it comes to hand-stitching a Christian Dior gown.

Cheaper energy would provide just the fillip Europe needs. Sadly, it is a pipe-dream.

The author is a Reuters Breaking Views columnist. The opinions expressed are her own.

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