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GE Slashes Dividend, reveals DOJ Probe of Accounting

General ElectricCo.slashed its dividend into a token amount and the federal regulatory authorities had opened a criminal probe for their…

General Electric
Co.

slashed its dividend into a token amount and the federal regulatory authorities had opened a criminal probe for their accounting principles because the fighting conglomerate aims to restructure under new CEO Larry Culp.

Executives unveiled Tuesday The Justice Department had opened a survey of the company’s latest accounting practices, along with a survey conducted in the Securities and Exchange Commission. GE also said that the SEC had expanded the scope of its investigation.

Both the Justice Department and the SEC are investigating a $ 22 billion fee that the company posted in the third quarter of GE’s acquisition of GE’s power unit and a charge of $ 6 billion. During the first quarter of a lack of insurance reserves, GE’s CFO Jamie Miller said investors at a conference call Tuesday.

GE reported a net loss of $ 22.8 billion in the third quarter due to the $ 22 billion charge, indicating the depth of the issues facing the company. Mr Culp took over October 1

after GE discontinued its CEO and warned that it would lack its cash flow and performance targets for the year. GE did not leave updated economic forecasts Tuesday but executives warned that GE would miss its previous goals significantly.

“It’s hard for an industrial company to play crime to compete and win a balance sheet, provided we are in,” says Culp in an interview Tuesday. “It’s a long-term issue we need to deal with – and we will deal with it in every way possible with a real sense of urgency. “

Mr. Culp refused to discuss the regulatory probes but said that he had spent his time as GE director since April and first month as CEO who performs his own due diligence. “I do not think any executive director could ever say that there is nothing in the forest,” he said. “I think we have our arms around a good part of the company.” [19659006] Investors had braked for a further reduction of the company’s one-time return. The company’s new quarterly dividend will be 1 cents per share, down from 12 cents. The move will save the company approximately $ 3.9 billion a year o ch marks a return to a company that was once one of the most generous dividends.

The 126-year-old company has fought over the past year with declining sales and profits that have forced the conglomerate to break apart and bring in an outsider CEO. But while plans to sell or spin, three main units are in progress, GE’s nuclear power business has continued to deteriorate.

On Tuesday’s conference call, Culp said the overall strategy in June “is the right plan ahead” and GE had no plans to sell shares to raise additional capital. But he said there was a need for dramatic changes in the power industry, as Culp said he plans to separate into two units. “Everything is on the table at power,” he said.

Revenues in the power tumbled 33% in the last quarter to $ 5.74 billion and the unit turned into a loss of operating income. Overall, GE revenue fell by 4% to $ 29.57 billion in the third quarter, as growth in its aerospace and energy facilities compensated a part of the power’s decline.

Excluding fees, GE reported a profit of 14 cents per share. On that basis, Wall Street expected to adjust earnings of 20 cents per share with a turnover of 29.92 billion dollars, according to Thomson Reuters.

When the switched CEO earlier this month, GE warned that it would charge a record fee of up to $ 23 billion for previous acquisitions in power operations, which makes turbines that generate electricity on power plants. The century-old operations have suffered profound losses from a global drop in demand for power generating equipment.

The power distribution, which had been GE’s largest nutrition revenue, has been at the center of GE’s economic and operational dysfunction. The unit has cut thousands of jobs to adapt to the market, but GE has said it will take many years to get the division back on track. GE said Tuesday that it would cut additional costs by consolidating business functions at the power plant.

Ms. Miller said the company would “lose significantly” its financial targets for 2018 without providing new forecasts. She warned of problems in the power business would last longer than expected and that GE might need to provide further support to the GE Capital arm.

Earlier this month, GE warned that it would miss its forecast for adjusted 2018 earnings of about $ 1 a share. Before Tuesday’s report, analysts had lowered their adjusted earnings share for profit, leading to a consensus of 88 cents, according to a Thomson Reuters. Until last fall, GE had focused on 2018 adjusted earnings of $ 2 per share.

GE reduced its dividend Tuesday because the amount of cash that the company generates from its power and other industrial companies has dried up. During the first nine months of the year, industrial output generated a negative $ 335 million in adjusted cash flow. Earlier, GE had forecast about $ 6 billion in cash flow for the year, from $ 9.7 billion last year and $ 11.6 billion in 2016.

Mr.. Culp said the company would provide an update to investors in early 2019.

GE planned to divide power generating breakdown into two units, one for its natural gas turbines and related services, and another entity including steam and nuclear power along with equipment and electricity distribution services.

Last month, GE revealed an error in its newest power turbines after a key failure failed and forced customer benefit

Exelon
Corp.

to turn off two Texas plants. GE has done repairs to the turbine fleet. GE booked $ 240 million in reserves related to the problem in the third quarter.

Analysis from WSJ Newsroom

 GE Slashes Dividend, reveals DOJ Probe of Accounting



Photo:

Michael Nagle / Bloomberg News

  • GE’s oust of CEO John Flannery this month marked the conglomerate’s last attempt to reverse his downturn. Listen to a record of WSJ journalists in a member’s exclusive call on the company’s shakeup.

Aerospace, which produces jet engines, remains the brightest spot, with a healthy demand for its latest model from companies such as

Boeing
Co.

and Airbus. GE said that unit revenue increased by 12% to $ 7.4 billion and segment profit increased by 25%. Equipment orders increased by 35% from a year ago.

GE said it is still focused on “shrinking and engaging GE Capital”, the company’s financial services. GE has substantially resigned from the division in recent years, but it has still been a source of problems this year, including the need to increase the insurance portfolio on the insurance portfolio by $ 15 billion.

Ms. Miller said that GE could need to provide more financial support to the GE Capital division “to achieve desired capital levels or to implement strategic alternatives around its portfolio.”

She said that the company also conducts annual revaluation of its insurance reserve in the fourth quarter, which could lead to an increase in cash allocated.

Boston-based companies have already announced plans to sell their transport operations, which make locomotives and spin from their healthcare facility, which makes MRI machines and hospital equipment. It also said that it planned to sell its 63% stake in

Baker Hughes

an oil field supplier.

In the third quarter, revenues and profits in healthcare and transport units were about normal from a year ago. GE said Tuesday expects to complete the sale of its transport business to

Wabtec
Corp.

in early 2019 but could complete sales earlier.

The company repeated its plan to leave its share in Baker Hughes, and the company said it would do it “in an orderly manner over several years”

GE shares rose 14 cents to $ 11.24 in early trading Tuesday . The stock is down almost 50% in the last 12 months. GE was kicked out of Dow Jones Industrial Average earlier this year.

Write to Thomas Gryta at [email protected]

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