Date
13 November 2018
General Electric is re-evaluating its strategy and structure, and may split its major divisions into separately traded units. Photo: Reuters
General Electric is re-evaluating its strategy and structure, and may split its major divisions into separately traded units. Photo: Reuters

GE considering breakup as financial troubles worsen

General Electric Co. is considering breaking itself up after a sharp shortfall in profits last year, the Wall Street Journal reports, citing chief executive John Flannery.

Flannery said the Boston-based group is re-evaluating its strategy and structure, and may split its major divisions into separately traded units.

“We are looking aggressively at the best structure or structures for our portfolio to maximize the potential of our businesses,” Flannery was quoted as saying at a conference call on Tuesday. “We need to continue to move with purpose to reshape GE.”

GE could spin off its credit-card business into Synchrony Financial and merge GE Oil & Gas division into a separately traded Baker Hughes, he said.

Once the most valuable US company with a financial-services arm that rivaled the biggest banks and a media empire that included NBC, GE has been shrinking its operations since the financial crisis to focus on its core industrial divisions, the Journal said.

It also made big bets on oil and coal markets that have depressed recent results, the newspaper said.

According to Reuters, Flannery is eliminating thousands of jobs and cutting US$3.5 billion in costs as he tries to solve problems he inherited when he became CEO on Aug. 1, including falling sales of power turbines, a build-up of inventory and declining profit margins in some businesses.

GE said it will provide another update on its review in the spring. A decision could come then, CNBC reported, citing sources close to GE.

The company on Tuesday announced more than US$11 billion in charges, including US$6.2 billion after tax for reevaluation of insurance assets, US$3.4 billion for US tax changes and US$1.8 billion for impairments of energy financing at GE Capital, Reuters said. The insurance charge was double what GE warned last year.

The charges mean its 2017 profit, to be reported next week, will be at the bottom end of its forecast of US$1.05 to US$1.10 a share, GE said.

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RC/CG

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