General Electric is in Deeper Trouble Than Anyone Realized

A household name in American business is in increasingly difficult financial straits, even while the economy is rebounding and the stock market is strong.

General Electric stock has already dipped to a two-year low in October after changes in management failed to boost consumer and investor confidence in the energy giant. Recent months have also seen a sell off even more divisions of the company and a dramatic drop on energy income and profits, once the brand’s biggest strength.

While the top supplier of both commercial and residential products is still in business, the brand has been freefalling in value; so far it has lost $70 billion in value in 2017 alone, according to CNN. The company is operating in crisis mode, desperately trying to recover and rebound.

Chaos at General Electric

With almost 300,000 employees, General Electric has had uneven leadership and seen a string of departures in recent months. The early retirement of the Chairman of the Board, along with the surprise departure of CFO Jeffrey Bornstein and a significant portion of the rest of the company’s leadership team left the company floundering for direction this fall.

General Electric’s new CEO John Flannery has delayed the launch of the brands new headquarters in Boston, grounded their private corporate jets and even slashed the company car budget for the brands remining executives. According to experts at JPMorgan, there is a high likelihood that the brand will have to cut dividends, though GE denies this, stating that the “dividend remains a priority.”

Failure Despite a Strong Market

General Electric’s struggle is even more alarming given the state of the rest of the well-known American brands on the US stock market. Rivals United Technologies and Honeywell, for example, are thriving.

Both analysts and shareholders point to management, which has in the past been a highlight of GE’s brand. Management practices at General Electric were once seen as forward thinking and followed by other brands in a variety of industries and lauded in the media and press.

“Jeff Immelt is the CEO everybody loved to hate. The management team fell down in terms of execution,” according to Barbara Noverini, an analyst at Morningstar.

Under Immelt, General Electric began to break apart and falter. Immelt eliminated the media branch of the company, NBC Universal, and sold off the majority of GE Capital, one time it’s most powerful financial division. Even its namesake appliance business was sold off under Immelt, it is now owned by China’s Haier Group. GE is even trying to get rid of its hallmark lightbulb business.

General Electric’s remaining businesses are not exactly thriving either; their stakes in energy, transportation, aviation and healthcare continue to falter. Even cash glow continues to decline; the brand’s free cash flow has been in decline for over five years.

Even though the brand now has new leadership, they are struggling more than Wall Street had originally feared. GE stock took another tumble in late October, dropping 6% before slightly correcting itself.

General Electric is scrambling to self-correct; the company has already begun to sell off even more businesses and plans to continue to do so over the next two years. Another $20 billion worth of businesses are expected to be jettisoned by GE in the coming 24 months.

New CEO Flannery is expected to continue to cut costs and may even need to face potential layoffs, even after cutting jet, car and other expenses. GE’s recent downgrade of its 2017 forecasted earnings is another startling sign of trouble, while its rapidly shrinking free cash flow continues to impact investor and Wall Streeet condidence.

The alarming combination of a stock market free fall, drastically reduced cash flow and significant cutbacks continue to reduce the confidence investors have in the brand. Can this once iconic leader of American industry recover, or will the last ditch, desperate measures put into play by the new leadership team make a difference?

Regards,

Ethan Warrick
Editor
Wealth Authority


Most Popular

These content links are provided by Content.ad. Both Content.ad and the web site upon which the links are displayed may receive compensation when readers click on these links. Some of the content you are redirected to may be sponsored content. View our privacy policy here.

To learn how you can use Content.ad to drive visitors to your content or add this service to your site, please contact us at [email protected].

Family-Friendly Content

Website owners select the type of content that appears in our units. However, if you would like to ensure that Content.ad always displays family-friendly content on this device, regardless of what site you are on, check the option below. Learn More



Most Popular
Sponsored Content

These content links are provided by Content.ad. Both Content.ad and the web site upon which the links are displayed may receive compensation when readers click on these links. Some of the content you are redirected to may be sponsored content. View our privacy policy here.

To learn how you can use Content.ad to drive visitors to your content or add this service to your site, please contact us at [email protected].

Family-Friendly Content

Website owners select the type of content that appears in our units. However, if you would like to ensure that Content.ad always displays family-friendly content on this device, regardless of what site you are on, check the option below. Learn More