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G.E. Earnings Show Glimmers of a Turnaround, but Big Challenges Still Loom

Category: Business,Finance

“There were no new negative surprises,” said Deane Dray, an analyst at RBC Capital Markets. “That’s really important for G.E. at this stage.”

G.E.’s large and once-lucrative power business lost $872 million in the quarter as its revenue fell 25 percent, to $6.8 billion. By contrast, the jet engine division, which benefited from brisk sales to Boeing and Airbus, reported a 24 percent increase in profit, to $1.7 billion; the unit’s revenue rose 21 percent, to $8.5 billion.

Mr. Culp, known as an expert operating executive during his 14 years leading Danaher, a smaller industrial company, succeeded John Flannery, who was pushed out of G.E.’s top job after a little more than a year.

Within weeks, Mr. Culp had sharply written down the value of G.E.’s power division with a $22 billion good-will charge. The move reflected a recognition that the company had overpaid in acquiring the energy assets of France’s Alstom and had badly misjudged the slowdown in demand for electrical power equipment.

Mr. Culp also slashed G.E’s quarterly dividend to 1 cent a share from 12 cents a share, a decision that will save the company $4 billion a year in cash. In December, G.E. said it would sell a portion of its industrial software unit, GE Digital, and spin off the rest.

In announcing its fourth-quarter results, G.E. also said it had reached an agreement in principle with the Justice Department to settle a long-running investigation into WMC, a subprime mortgage lender that G.E. shut down years ago. The company agreed to pay a civil penalty of $1.5 billion, in line with what it had set aside to pay for the liability.

G.E. still faces other government inquiries. Last year, it set aside reserves of $15 billion to pay for the higher-than-expected cost of reinsuring long-term care policies in its finance arm, GE Capital. The Securities and Exchange Commission is investigating its miscalculation and accounting in that unit.

G.E. has also disclosed that the commission is investigating its big write-down in the power business and how that business accounted for service contracts. In October, G.E. said the Justice Department is also probing its accounting in the power unit and for the insurance obligations.


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