General Electric continues collapse

NEW YORK • Shares of General Electric Co continued its slide on Wednesday and wiped out all its gains in 2018, a day after the U. S. industrial conglomerate announced more than US$11 billion in charges and hinted about a potential breakup.

GE dropped as much as 5.1 per cent to US$ 17.28, adding to the about 42 per cent decline in the past 12 months.

Analysts said the surprise charges announced by GE had hurt the company’s credibility with investors as it comes just two months after chief executive John Flannery issued a detailed plan to reset the company’s financial targets.

“With the collapsing nature of almost everything in question around quality of earnings and free cash flow, we now scratch our heads as to how much of this is enabling a mitigation of what we think should be more of a hard landing,” JP Morgan analyst Stephen Tusa said in a note.

GE’s decision to keep aside US$ 15 billion in reserves to cover potential payouts on policies dating back decades represents about 7 per cent of the company’s “incremental standing equity value,” Tusa said.

The charges were several times larger than the amount GE had forewarned investors.

Analysts said GE’s move to suspend dividends paid by GE Capital to the parent company would reduce the value of the business in the conglomerate’s portfolio.

General Electric said the dividend f rom i ts financial arm — which totalled US$ 20 billion in 2016 — is suspended “for the foreseeable future.”

On Tuesday, Flannery hinted that GE could be looking closely at breaking itself up to maximize the value of GE’s power, aviation and healthcare units.

But analysts wondered about the feasibility of such a plan for the 125- year- old conglomerate.