Old dog General Electric learns new tricks from emerging-market partners

America’s largest conglomerate, General Electric, is learning humility abroad as it taps into global markets — and is picking up management techniques along the way.

GE executives say its seven-year-old joint venture with South Korea’s Hyundai Card and Hyundai Capital shows that — in addition to boosting profit and serving as a guide in an unfamiliar market — new partners can sometimes teach GE new tricks in marketing, operational efficiency and customer relations.

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In countries such as China, India, South Korea and Brazil, foreign companies are increasingly able to control the terms of partnerships when Western companies want to strike joint ventures to tap emerging-market growth. While risks abound for companies such as GE, IBM and Alcoa, so do the opportunities. GE is also finding that management intelligence sometimes emerges as a side benefit.

GE could use the help. A company at its pinnacle in the late 1990s as chief executive Jack Welch handed it over to Jeffrey Immelt, it’s gone through a series of fits and starts since. In Immelt’s first decade as CEO, GE’s stock price slid from about $40 a share to its current value of about $20. Immelt has had mixed reviews in managing the company through downturns after the Sept. 11, 2001, terrorist attacks and the 2008 credit crisis that bruised GE and forced it to seek government help in the bond markets.

Meanwhile, the Seoul-based financial-services business of Hyundai Motor Group has been growing rapidly since 2004, when it sold a 43 percent stake in its credit card and consumer lending business to GE for $600 million after a credit crisis struck South Korea and Hyundai Capital faced a near-$1 billion loss.

“This was the first time we took a large amount of money into a company where we don’t have full control,” said Bernard van Bunnik, a GE business executive and deputy chief executive at Hyundai Capital and Hyundai Cards. He’s learned that partnerships can be mutually beneficial. “It’s a good way to get to scale in a new country.”

Giving up some control

The Fairfield, Conn., company used to be gun-shy about such minority share joint ventures and wanted full control of business operations in foreign countries. Executives say Welch avoided minority stakes because he thought they would threaten the culture of speed and efficiency he’d built inside GE. But as its foreign revenue has tilted to more than 50 percent in recent years, GE is striking partnerships as a means of finding market intelligence in places such as Asia and the Middle East.

The Hyundai financial-services business has grown dramatically. Koreans are heavy credit card users, and Hyundai offers branded credit cards with annual fees ranging from $20 to $2,000 for luxury cards. Hyundai makes mortgage, personal and auto loans, as well. Hyundai Capital and Hyundai Card’s assets have grown to $25 billion, and GE has expanded its investment in the company, injecting a total of $3 billion.

Ted Chung, chief executive of Hyundai Card and Hyundai Capital, said GE has taught Hyundai how to improve its risk management, compliance and back-office procedures in finance. Meanwhile, Chung and his team have taught GE some new collections methods for emerging markets, and they are regarded as a marketing model.