GE: A dividend cut and a criminal probe
In the first earnings report with its new CEO, General Electric this week revealed “an expanded federal probe into its accounting, a vastly diminished dividend, and a hobbled power business,” said Thomas Black and Rick Clough in Bloomberg.com. The flurry of bad news “torpedoed hopes for a quick turnaround” following John Flannery’s ouster as CEO last month. The SEC had been investigating GE’s accounts since January, but the revelation of the Department of Justice probe has left investors wondering what else they might not know. In a sign of how bad the trouble is, GE slashed its dividend by more than 90 percent, to a token penny per share.
New CEO Larry Culp is “a hard worker, but he’s not a miracle worker,” said Tom Buerkle in BreakingViews.com. Cutting the dividend shows he’s serious about saving the company, but GE is still “haunted by ghosts of the past.” The conglomerate continues to book losses in its reinsurance business, even though it quit selling policies a decade ago. After a stunning $22 billion write-down in its power equipment business, its gas turbines division is being “hammered by utilities switching to renewables” and is still cratering. Culp has been trying to isolate the unit and contain the damage. But that “won’t generate new orders.”