GE: Powerful no more?

I’m linking below a good narrative about GE and its woes written by Joe Nocera in the New York Times.  It appeared on today’s issue of the newspaper.  This week and the ones leading up to that has been quite a ride for the giant General Electric.  With one of the few in the US who’s maintained its triple A credit rating, the company is on the verge of losing that prestige amidst the issues it is facing with its finance arm, GE Capital.  Some excerpts from today’s piece:

The company sent out a blast e-mail message Wednesday morning saying it was well positioned to handle whatever the economy might throw at it. It made no difference. Earlier in the week Jeffrey Immelt, the chief executive, released his annual letter to shareholders, pointing out that the company had $18 billion in profit last year. Investors shrugged.

On Thursday morning, the company’s chief financial officer, Keith Sherin, appeared on CNBC, which G.E. conveniently owns, and offered a passionate defense of the company. “We have an incredibly strong liquidity position,” Mr. Sherin said.  “We don’t need more capital,” he insisted. “On a tangible common equity basis, we are fine. Our tangible common equity for GE Capital is higher than any of the big banks.”

“The last time G.E. cut its dividend was during the Great Depression,” [Jerry Useem] pointed out. He was quiet for a minute. Then he added, “If G.E. is in trouble, God help us all.”

In truth, G.E. delivered on its earnings estimates because of GE Capital, which often sold assets at the end of the quarter to make up for any shortfall.

Read the whole piece here.


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