Give Them Credit

Before GE could reach out to Chinese consumers, it had to learn to work with Chinese banks.

That’s good, says Jay Bourgeois, a professor at the University of Virginia’s Darden School of Business, because hubris is a common pitfall for dealmakers. “There are companies that, after their 20th deal, will say, ‘We’ve got it down,’” he says. “Then the next one they buy blows up.” (He cites Bank One, which spoiled its reputation as a strong acquirer when it fumbled its purchase of First Chicago in 1998.)

The SDB deal has called on GE’s willingness to make course corrections, most notably with the deal-structure changes GE had to make when its $100 million investment stalled. Smaller adjustments have been needed, too. For example, when the integration team worked with bank employees on risk management, they heard objections about the case studies GE wanted to use: those cases were all from developed markets, said SDB managers — they weren’t applicable to China. “We agreed with them,” says Barrett. “So now we’re talking to colleagues in markets like Mexico, Thailand, and Indonesia to find out how things are being done there.”

Technology helps GE be more nimble. To help capture and disseminate what it learns about dealmaking worldwide, the company uses an “E-integration” tool. This is an internal Website that serves as a project-management program as well as a knowledge-sharing portal. Integration managers are required to put their plans online and show what stages they have completed. The tool also has an online bulletin board to allow teams to share what they have learned with one another. An integration manager in Shenzhen can go online to ask his counterpart in Bangkok how that team dealt with a certain problem.

Trial and Error

It’s too soon to say whether GE Money’s skills as a partner will bring it success in China’s finance market, but the early signs are hopeful. For example, efforts to improve bank processes are bearing fruit. The time required to issue new credit cards fell from 30 days down to 8 to 10 days, and ultimately to a mere 5 days. Customers have reacted positively, says Barrett, and GE Money sees its competitors in the market redoubling their own efforts in response.

GE’s efforts to get SDB employees thinking in terms of metrics are taking hold, too. Two important measures are “total time to yes” (TTY), which is the time it takes to approve a loan or card application, and “total time to cash” (TTC), the period before a customer has the money in hand. “Now, if you go into any area where we’re handling mortgages, for example, people are talking about TTY all the time,” comments CEO Newman. “It’s infiltrated the culture, and TTY has really come down in mortgages. That’s a GE contribution, no question about it.”

It may take longer for change to reach the bank’s branches. When tellers at SDB’s mostly empty Shanghai branch were asked about the credit card the bank offers with Wal-Mart, none of them had heard about the partnership with the retailer, let alone the co-branded card. (To be fair, the card is distributed only at Wal-Mart’s retail outlets in southern China.)

The bank’s financial situation is looking up. SDB reported a jump in earnings of 300 percent last quarter, due to a combination of factors, including Newbridge’s work in cleaning up the bad-loan portfolio and the new products GE has launched. Based on such improvements, May Yan of Moody’s says that she has a positive outlook for SDB’s financial-strength rating.

For GE at least, the experience with SDB will likely be only the first step in an effort to find out what does and doesn’t work in China. “We’re all trying to figure out the magic formula,” says Pinto. “But I don’t think there is one. It’s all trial and error.”

Don Durfee is managing editor of CFO Asia.

Click here to see a list of GE Money’s recent partnerships and acquisitions in Asia.


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