GE reports $9.8B loss; discloses SEC accounting inquiry
General Electric reported quarterly results on Wednesday that illustrated how far it has fallen, and the steep hill the company — once a titan of American industry — must climb to turn itself around.
There were no big surprises; those had mostly come earlier.
But in a conference call with analysts, GE disclosed that the Securities and Exchange Commission had opened an investigation into the company’s handling of its insurance obligations and how it accounted for certain services contracts. The inquiry was in its “very early stages” and GE was “cooperating fully,” said Jamie Miller, the company’s chief financial officer.
Last week, GE made a startling announcement that it would take a $6.2 billion charge in the fourth quarter, and set aside $15 billion over seven years to pay for obligations held by its finance unit, mainly on long-term care insurance policies.
Last fall, shortly after taking over as chief executive, John Flannery told investors that GE’s big electricity-generation division had badly misjudged the market and produced too many power turbines, warning that it would take a year or more to fix the business.
At the time, GE sharply reduced its earnings forecast and cut its dividend by half.
Throughout the conference call on Wednesday, Flannery emphasized that despite its current challenges, GE had industrial businesses that were fundamentally strong. “We have a lot to work on,” he said, “but we have a lot to work with.”
Much of the turnaround, Flannery insisted, could be accomplished with belttightening and improved execution. And he pointed to what he described as a bright spot: that cash flow from industrial operations, although down, was above expectations. The cash flow, he said, was one of the “green shoots” beginning to emerge as GE tries to reverse its slide.
Overall, GE reported a net loss of $9.8 billion for the last three months of the year. That included the big charge for insurance obligations and a separate $3.5 billion charge related to the tax law signed at the end of 2017.