I couldn’t help to be struck by the news this past week that General Electric is divesting itself of what, as it turns out, is the seventh largest bank in the country, GE Capital. Apparently, the higher ups at GE have determined it is better to do business with a bank as opposed to actually, you know, being a bank.
But that isn’t what struck me.
It’s that, according to certain analysts, the buyers who will eventually line up for little pieces of GE Capital may not be the usual suspects (who, of course, would have the ability to come in a gobble up everything in one fell swoop). They may not be, in other words, the J.P. Morgan Chases and Bank of Americas of the world doing the buying, but a number of smaller, more nimble bank groups; along with a number of smaller private equity firms looking to cherry pick strategic, undervalued GE Capital assets for their own portfolios.
Couple that with what many of the same analysts see as a movement in the sector to reduce risk and minimize exposure, and you can see how the more consolidated the banking industry is becoming, the more it is rewarding (and maybe even spawning) smaller, more nimble, more market driven and more privately held institutions.
It’s not unlike what Herb Kelleher and his lean, mean, fightin’ machine, Southwest Airlines, did to the airline industry a while ago, or what hyper-efficient and more user-friendly video alternatives like Hulu, Netflix and Amazon are doing to the lumbering, status quo-loving and only nominally responsive cable behemoths like Comcast and Time Warner, leaving in their wake an ever-growing trail of so-called consumer “cord cutters.”
I’ve been talking about it for four years now, but what continues to happen to the rest of the industrial world has been a big part of the reason why U.S. manufacturing continues to experience such a remarkable turnaround and such an amazing reversal of fortunes.
Sure, technology and automation have been key to our sector’s renaissance, as have more realistic worker salaries, smarter logistics and a deeper appreciation for nearness-to-market. But never underestimate the importance of the shift from a relatively few gigantic, sprawling “mother ship” factories that once dotted the landscape to the tens of thousands of smaller, nimbler and far more market-focused ones that have risen from their ashes.
Orange is the new black? Hardly. In U.S. manufacturing (and just maybe U.S. banking), it’s small. It’s efficient. And it’s nimble.