L'Opinion - - Do­nald Trump, What Else ? - Tho­mas Gry­ta

his own due di­li­gence. “I don’t think any CEO could ever, should ever, say there is no­thing in the wood­pile,” he said. “I think we’ve got our arms around a good bit of the com­pa­ny.” In­ves­tors had bra­ced for ano­ther re­duc­tion in the com­pa­ny’s once-re­liable di­vi­dend. The new quar­ter­ly di­vi­dend of a pen­ny a share is down from 12 cents. The move will save GE about $3.9 bil­lion a year, and marks a re­ver­sal for a com­pa­ny that once was one of the most ge­ne­rous di­vi­dend payers.

On Tues­day’s confe­rence call, Mr. Culp said the ove­rall stra­te­gy set in June un­der his pre­de­ces­sor “is the right plan going for­ward” and GE had no plans to sell shares to raise ad­di­tio­nal ca­pi­tal. Ho­we­ver, he said dra­ma­tic changes were nee­ded in the po­wer bu­si­ness, which Mr. Culp said he plans to se­pa­rate in­to two units. “Eve­ry­thing is on the table at po­wer,” he said.

Re­ve­nue in the po­wer unit in the la­test quar­ter tum­bled 33% from a year ear­lier to $5.74 bil­lion, and the unit swung to an ope­ra­ting loss. Ove­rall, GE said re­ve­nue drop­ped 4% to $29.57 bil­lion in the third quar­ter, as growth in its avia­tion and ener­gy units off­set some of po­wer’s de­cline.

Ex­clu­ding charges, GE re­por­ted ear­nings of 14 cents a share. On that ba­sis, Wall Street was ex­pec­ting ad­jus­ted ear­nings of 20 cents a share on re­ve­nue of $29.92 bil­lion, ac­cor­ding to Thom­son Reu­ters.

When it swit­ched CEOs ear­lier this month, GE war­ned it would take an ac­coun­ting charge of up to $23 bil­lion for pre­vious ac­qui­si­tions in the po­wer bu­si­ness, which makes tur­bines that ge­ne­rate elec­tri­ci­ty at po­wer plants. The cen­tu­ry-old bu­si­ness has suf­fe­red from deep losses amid a glo­bal drop in de­mand for po­wer-ge­ne­ra­ting equip­ment.

The po­wer di­vi­sion, which had been the com­pa­ny’s big­gest in terms of re­ve­nue, has been at the cen­ter of GE’s fi­nan­cial and ope­ra­tio­nal woes. The unit has cut thou­sands of jobs to ad­just to the mar­ket, but GE has said it would take years to get the di­vi­sion back on track.

GE said Tues­day it would cut ad­di­tio­nal costs by conso­li­da­ting cor­po­rate func­tions at the po­wer unit.

Ear­lier this month, GE had war­ned it would miss its fo­re­cast for ad­jus­ted 2018 ear­nings of around $1 a share. Be­fore Tues­day’s re­port, ana­lysts had lo­we­red their ad­jus­ted per-share ear­nings tar­gets, pu­shing the consen­sus down to 88 cents, ac­cor­ding to a Thom­son Reu­ters. Up un­til last fall, GE had tar­ge­ted 2018 ad­jus­ted ear­nings of $2 a share. The amount of cash the com­pa­ny ge­ne­rates from its po­wer and other in­dus­trial bu­si­nesses has dried up. In the first nine months of the year, the in­dus­trial bu­si­ness had a ne­ga­tive $335 mil­lion in ad­jus­ted cash flow. Pre­vious­ly, GE had pro­jec­ted about $6 bil­lion in cash flow for the year, com­pa­red with $9.7 bil­lion last year and $11.6 bil­lion in 2016., Mr. Culp said the com­pa­ny would pro­vide an up­date to in­ves­tors in ear­ly 2019.

GE plans to split the po­wer­ge­ne­ra­ting di­vi­sion in­to two units, one for its na­tu­ral gas tur­bines and re­la­ted ser­vices, and ano­ther that in­cludes steam and nu­clear po­wer, along with equip­ment and ser­vices for dis­tri­bu­ting elec­tri­ci­ty.

Last month, GE dis­clo­sed a flaw in its ne­west po­wer-plant tur­bines af­ter a key part fai­led, for­cing uti­li­ty cus­to­mer Exe­lon Corp. to shut down two Texas plants. GE, which has been ma­king re­pairs to the fleet of tur­bines, boo­ked $240 mil­lion in re­serves re­la­ted to the pro­blem in the third quar­ter.

The com­pa­ny’s avia­tion bu­si­ness, which pro­duces jet en­gines, re­mains the brigh­test spot amid heal­thy de­mand for its la­test en­gine mo­del from air­plane ma­kers like Boeing Co. and Air­bus. GE said the unit’s third-quar­ter re­ve­nue jum­ped 12% to $7.4 bil­lion while pro­fit rose 25%. Equip­ment or­ders sur­ged 35% from a year ear­lier.

GE said it re­mains fo­cu­sed on “shrin­king and de­le­ve­ra­ging GE Ca­pi­tal, the com­pa­ny’s fi­nan­cial-ser­vices arm. The di­vi­sion has been pa­red back si­gni­fi­cant­ly in recent years, but re­mains a source of pro­blems, in­clu­ding the need to boost re­serves on its in­su­rance port­fo­lio by $15 bil­lion.

Ms. Miller said that GE may need to give more fi­nan­cial sup­port to GE Ca­pi­tal “ei­ther to achieve de­si­red ca­pi­tal le­vels or to exe­cute stra­te­gic op­tions around its port­fo­lio.”

She said the com­pa­ny is al­so per­for­ming the an­nual re-eva­lua­tion of its in­su­rance re­serves in the fourth quar­ter, which could lead to an in­crease in the cash it sets aside.

The Bos­ton-ba­sed com­pa­ny has al­rea­dy an­noun­ced plans to sell its trans­por­ta­tion bu­si­ness, which makes lo­co­mo­tives, and spin off its health-care unit, which makes MRI ma­chines and hos­pi­tal equip­ment. It al­so has said it plans to re­duce its 63% stake in Ba­ker Hu­ghes, an oil-field ser­vices pro­vi­der.

In the third quar­ter, re­ve­nue and pro­fit at the health-care and trans­por­ta­tion units were rough­ly flat with year-ear­lier le­vels.

GE said Tues­day it ex­pects to com­plete the sale of its trans­por­ta­tion bu­si­ness to Wab­tec Corp. in ear­ly 2019 but could com­plete the sale soo­ner.

The com­pa­ny rei­te­ra­ted its plan to exit its stake in Ba­ker Hu­ghes, saying it would do so “in an or­der­ly fa­shion over se­ve­ral years”.


GE has strug­gled over the past year with de­cli­ning sales and pro­fits that have for­ced the conglo­me­rate to break it­self apart and bring in an out­si­der CEO.

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