‘New era’ for GE met with doubt

Investors left wondering whether revamp is enough

NEW YORK— Even before John Flannery began talking, Monday looked like one more bad day for General Electric Co.

It began at about 6:30 a.m., with news that GE, once one of the most celebrated U.S. companies, was cutting its quarterly stock dividend for only the second time since the Great Depression.

Then things got worse. In front of hundreds of investors in midtown Manhattan, the new CEO delivered his long-awaited plan to shrink the beleaguered company back into Wall Street’s heart. GE, he said, would now focus on just three businesses — power, aviation and health-care equipment — and exit others that have defined the quintessential American conglomerate for decades.

The reaction in the stock market was swift and brutal. GE’s stock price, already down 35 per cent this year and the worst performer in the Dow industrials, tumbled on Monday by the most in eight years. While Flannery’s plans were generally in line with recent speculation, his presentation left some investors wondering if his revamp would be enough to right the 125-year-old company.

“There is no doubt that the plan outlined today marks a new era for GE,” Deane Dray, an analyst at RBC Capital Markets, said in a note to clients. “That said, does it go far enough?”

GE lost $1.47 (U.S.), or 7.2 per cent, to $19.02. The stock hadn’t fallen that much in one day since March 30, 2009. It’s down 40 per cent this year and trading at five-year lows.

“John Flannery’s strategic road map reflects a rigorous portfolio review, but suggests a tough slog ahead,” Gautam Khanna, an analyst at Cowen & Co., said in a note to clients.