GE lunges again following raft of negative news, liquidity fears

General Electric Co. shares sank after two analysts sounded more alarm bells around the company’s liquidity, and a report said former GE staff were being questioned by federal investigators about its troubled insurance business. Once among the most respected U.S. businesses, GE can now barely go one full week without a negative headline. In the past month, news about an expanded probe of its accounting, credit rating downgrades, potential tax problems, and escalating liquidity concerns have led to a steep 27-per-cent dip in the stock price, overshadowing GE’s more positive announcements, including its accelerated exit from Baker Hughes and the restructuring of the struggling power business. GE’s finance arm, especially, has garnered a lot of attention. The insurance business came under the spotlight earlier this year when GE said it would take a US$6.2 billion charge related to an old portfolio of long-term care insurance, and has since then thrown up many more red flags. J.P. Morgan analyst Stephen Tusa warned earlier this year that the finance unit, GE Capital, may have underappreciated risk. On Friday, Deutsche Bank analyst Nicole DeBlase slashed her price target on the stock by more than a third amid continuing questions on the beleaguered multinational’s liquidity outlook. J.P. Morgan’s Tusa, a longtime bear on the company, said commentary from GE’s partner Safran SA supported his view that profit and cash flow growth at the aviation segment would be below consensus expectations. The other blow came as the Wall Street Journal reported that several former GE employees have said the company’s insurance business failed to internally acknowledge worsening results over the years. GE spokeswoman Jennifer Erickson declined to comment on the specifics of the insurance business investigation, saying in an emailed statement that the company is “exploring every option to manage and mitigate risk” from its legacy insurance liabilities. GE closed down 5.54 per cent at US$7.50 on Friday. The stock has remained below US$8 over the past two weeks, a level last seen in March 2009 at the financial crisis market bottom.