BAD NEWS BUILDS AT GE
$6B charge could prompt asset sales
The latest bad news for GE — an unexpected $6 billion charge related to its insurance division — could lead the struggling Boston conglomerate to sell off some of its key businesses, the company and analysts said.
“We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses,” Chief Executive Officer John Flannery said yesterday during a conference call with analysts. “It’s a kind of thing that could result in many, many different permutations including separately traded assets really in any one of our units, if that’s what made sense.”
GE told investors it would take a $6.2 billion charge related to liabilities from its long-term health insurance division. That unit hasn’t been accepting new business since 2006, but is still on the hook for contracts signed before then. GE had warned a charge may be coming, but estimated it to be about $3 billion.
Shares of the Boston company fell 2.9 percent yesterday. GE was the worst performing stock of 2017 in the Dow Jones industrial average.
Flannery has been desperately trying to cut costs and turn GE around after taking over for Jeff Immelt last year. Flannery has cut back on costs — including exorbitant executive perks — and is in the middle of a strategic review of the company’s business units.
“It’s especially frustrating to have this type of development when we’ve been making progress on many of our key objectives,” he said during the conference call.
Jeff Windau, an analyst with Edward Jones, said GE is likely to sell or spin out some of its businesses in the coming year. He said its health care business is a prime candidate.
“It’s a good business, it’s well run, it’s been doing well,” Windau said. “It’s health care and it’s not quite as aligned as the other businesses, (so) it’s probably a little easier to break out.”
Current, a GE-owned lighting startup in Boston, is likely to be sold, Flannery has said.
As part of its cost-cutting, GE said it would cut as much as a quarter of its headquarters staff, though the company has said it remains committed to adding 800 jobs in Boston. GE has also delayed part of its new headquarters on the Fort Point Channel, saying the two-stage approach will save money.
Mayor Martin J. Walsh said he’s still reviewing reports of General Electric potentially breaking up but said the city would not give the company any more breaks or benefits if it does so.
“That’s not going to be an option, we already negotiated with them and they’re here,” Walsh told reporters yesterday.
Walsh said he hadn’t spoken with GE executives about the potential breakup.
“I haven’t had a conversation yet with GE, but we’ll look at it,” Walsh said. “We’ll look into it a little bit more and comment later.”