General Electric Company (NYSE:GE)

[cyclone]

GE merges transportation unit with Wabtec in $11.1 billion deal

Reuters Staff
May 21, 2018

(Reuters) - General Electric Co (GE.N) confirmed on Monday it will merge its transportation business that makes train engines with Wabtec Corp (WAB.N), a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion.

GE and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.

More details in https://www.reuters.com/article/us-getra...IM12I?il=0

[weijian]

On a weighted-basis, probably more wrong than right for capital allocation.

What the Hell Happened at GE?

Few corporate meltdowns have been as swift and dramatic as General Electric’s over the past 18 months—but the problems started long before that.

http://fortune.com/longform/ge-decline-w...-happened/

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GE Kicked Out of Dow, the Last 19th Century Member Removed

By Sarah Ponczek  and Rick Clough
June 20, 2018, 5:42 AM GMT+8 Updated on June 20, 2018, 7:56 AM GMT+8

General Electric Co. suffered a crowning ignominy Tuesday as overseers of the Dow Jones Industrial Average kicked the beleaguered company out of the stock gauge it has inhabited for more than a century.

Once the world’s most valuable company, GE will be replaced by Walgreens Boots Alliance Inc., the Deerfield, Illinois-based drugstore chain created in a 2014 merger. The change will take effect prior to the open of trading next Tuesday. Down 26 percent, GE is the worst performer in the Dow in 2018, as it was last year, as well.

“It was an issue not of if, but when,” said Quincy Krosby, the chief market strategist at Prudential Financial Inc. “The GE that was dominant in the Dow in the ’70s and ’80s is no longer the same GE.”

The change means the last original Dow member has finally been removed from the benchmark formed in 1896, with GE joining the likes of Distilling & Cattle Feeding, National Lead, Tennessee Coal & Iron and U.S. Rubber. GE briefly left the index, but has been in it continuously since 1907.

“Since then the U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. Adding Walgreens makes the index “more representative of the consumer and health care sectors of the U.S. economy.”

GE has also changed. It’s lost almost $140 billion of market value in the last year, spurring a plan to shed $20 billion of assets in a bid to realign businesses and cut costs as the company grapples with debt challenges and flagging demand. Chief Executive Officer John Flannery, who took over for Jeffrey Immelt last year, said in May there is no “quick fix” to the company’s problems.

In Walgreens, the Dow gets something less than an investor darling. The stock fell in both 2016 and 2017 and is down another 11 percent since December as the chain dealt with the competitive pressures plaguing most of the retail industry. One positive was probably its stock price: at around $65, it won’t distort the Dow, whose members are weighted according to price rather than market capitalization.

More details in https://www.bloomberg.com/news/articles/...er-removed

[weijian]

GE Powered the American Century—Then It Burned Out

Welch, now 83, has slowed from his relentless peak, but was a ubiquitous presence on Nantucket this summer, never hiding his disdain for the man he chose to succeed him. He fumed about operational failures in the power business, and the execution of the pivot. Welch readily greeted old acquaintances with a grimace about the latest news of the company, saying he gave himself an A for the operation of his old shop, and an F for his choice of successor.

“I’m terribly disappointed. I expected so much more,” he said this week. “I made the best choice I thought I could make, and it didn’t turn out right.”

The old chairman isn’t sure the powerhouse of his time can be revived, but he hopes that Larry Culp can “build a new GE.”

To Flannery, Immelt, Welch and the others schooled in Crotonville, Larry Culp’s ascension punctured a deep and abiding conviction: General Electric made the greatest managers in the world, who could run anything better than anyone else. When the company they loved needed them most, though, the heirs to Edison’s ingenuity had run out of ideas.

In the cruelest of codas, the last CEO of America’s last great industrial conglomerate would be an outsider.

https://outline.com/zyHms4

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GE falls the most in 11 years after Madoff whistleblower calls it a ‘bigger fraud than Enron’
* General Electric shares fall after Madoff whistleblower Harry Markopolos targets the conglomerate in a new report, calling it “a bigger fraud than Enron.”
* The 175-page report claims GE was hiding the depths of its financial problems and would need to significantly raise its insurance reserves. It also points out alleged accounting issues with its oil and gas unit.
* “My team has spent the past 7 months analyzing GE’s accounting and we believe the $38 Billion in fraud we’ve come across is merely the tip of the iceberg,” Markopolos says in the report.
* Markopolos says he has given the report to securities regulators and that certain information he has uncovered was given to law enforcement only, and is not in the public report.

John Melloy & Kate Rooney
PUBLISHED THU, AUG 15 2019  7:40 AM EDTUPDATED THU, AUG 15 2019  4:19 PM EDT

General Electric shares saw their biggest drop in more than a decade Thursday after Madoff whistleblower Harry Markopolos targeted the conglomerate in a new report, accusing it of issuing fraudulent financial statements to hide the extent of its problems.

A website has been set up to disseminate the report, www.GEfraud.com, where Markopolos calls it “a bigger fraud than Enron.” The financial investigator, who was probing GE for an unidentified hedge fund, writes that after more than a year of research he has discovered “an Enronesque business approach that has left GE on the verge of insolvency.”

“My team has spent the past 7 months analyzing GE’s accounting and we believe the $38 Billion in fraud we’ve come across is merely the tip of the iceberg,” Markopolos said in the 175-page report. Markopolos alleges that GE has a “long history” of accounting fraud, dating to as early as 1995, when it was run by Jack Welch.

“It’s going to make this company probably file for bankruptcy,” Markopolos told CNBC’s “Squawk on the Street. ” “WorldCom and Enron lasted about four months. ... We’ll see how GE does.”

The stock closed 11% lower in its biggest drop since April 2008, ending the day at $8.01 per share.

GE’s CEO issued a statement calling the allegations false, and driven by market manipulation.

“GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple,” Lawrence Culp, chairman and CEO of GE said in a statement. “Mr. Markopolos’s report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report.”

Culp said the fact that Markopolos never talked to company officials before publishing the report “goes to show that he is not interested in accurate financial analysis, but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit.”

Enron, which had more than $63 billion in assets at the time, declared bankruptcy on December 2001 in what was then the largest corporate collapse in U.S. history. Roughly 4,000 Enron employees lost their jobs following its collapse. The energy company’s downfall began with the discovery of accounting irregularities. Twenty-one people, including former CEO Jeffrey Skilling, were convicted in the scandal, and accounting firm Arthur Andersen was forced out of business after it was found guilty of obstruction of justice.

A year after the Enron scandal broke, long-distance phone company WorldCom, filed for bankruptcy after revelations of an accounting fraud. It had $107 billion in assets at the time.

One area of Markopolos’ case focuses on GE’s long-term care insurance unit, for which the company had to boost reserves by $15 billion last year. By examining the filings of GE’s counterparties in this business, he alleges that GE is hiding massive losses that will only increase as policyholders grow older. He claims that GE has filed false statements to regulators on the unit. Separately, he goes on to find issues with GE’s accounting on its oil and gas business Baker Hughes.

The Wall Street Journal first reported on Markopolos’ findings.

Markopolos is a Boston-based accounting expert who gained attention after pointing out irregularities with Bernie Madoff’s investment strategy, and how it was impossible to generate the returns the fraudster claimed years before the Ponzi scheme was exposed. He was largely ignored at the time. More recently, Markopolos helped uncover a foreign currency trading scandal at a group of banks.

The Markopolos group looking into GE includes forensic accounting veteran John McPherson, co-founder of MMS Advisors, which specializes in the insurance industry.

More details in https://www.cnbc.com/2019/08/15/ge-share...nting.html

[weijian]

Incidentally,
John Hemption has some sort of response (their team has a small long position in GE).

http://brontecapital.blogspot.com/2019/0...eport.html
http://brontecapital.blogspot.com/2019/0...is-ge.html

[Big Toe]

1. GE is too large and complex for any person to understand completely all its businesses.

2. While GE may not be as bad as Enron but Harry Markopolos have valid points.

3. To say Long term care is toxic is an understatement. It is more than toxic.
i) Long Term Care = Long term claims, quite common for someone to claim for 10-20 years, for 72.5% of the time till death.
ii) Number of claimants increased from 260K to 303K from 2015-2018 and claims are just increasing, 2018 saw $10+B claims.
iii) Unlike traditional insurance where people dont really hope to claim, LTC is the opposite, many buy the policies KNOWING that they will claim soon enough.

4. What about price increases? Long Term Care is state regulated, only when the state approves then it is possible to increase premiums.
And it is a long process. In the meantime, LTC companies grapple with mounting losses and cant get out. It is like being trapped in a recurring nightmare and each time it reoccurs, it becomes worse.

5. If there has to be a worst business on earth, it has to be Long Term Care, the bleeding just dont stop( Bike share coming a distant 2nd)

6. IMO, this is not a business, it is a social responsibility, associated costs is a bottomless pit. This ought to be borne by the government. Not private enterprises. There is no money to be made, breaking even would be a miracle.

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GE Aviation ready to look at acquisitions as it eyes growth

By Tim Hepher and Rajesh Kumar Singh
November 16, 2021 4:25 AM +07

DUBAI, Nov 15 (Reuters) - GE Aviation is ready to look at acquisitions to top up its portfolio with technologies that could help it shape the future of flight, without waiting for a planned break-up of its parent General Electric Co (GE.N), its top executive said on Monday.

"(If there is) alignment with our strategic goals and assuming that the business case makes sense, we are open to look at opportunities," GE Aviation Chief Executive John Slattery told Reuters.

"I want to be clear that our opportunities to be strategic in the marketplace are effective today," he said in an interview at the Dubai Airshow, adding such opportunities "probably run deeper and wider" in systems such as electric power systems than in jet engines.

"We do want to grow; the opportunities are there within our ecosystem of aerospace and defense so there will be plenty of opportunities for growth," Slattery said.

He stressed the world's largest aero engine maker felt under "no undue pressure" to make external investments.

General Electric (GE) last week announced plans to spin off its businesses into three public companies, marking the end of the 129-year-old conglomerate. read more

The Boston-based company will separate the healthcare company in early 2023. It will combine GE Renewable Energy, GE Power and GE Digital and spin off the business in early 2024.

Following the split, it will become an aviation company, helmed by Chairman and Chief Executive Larry Culp.

The aviation company will inherit GE's other assets and liabilities, including its runoff insurance business.

Slattery said GE Aviation had not been placed under any restrictions by Culp or the board limiting its ability to look at adjacent technologies "or other inorganic opportunities" - as long as they fit the strategy and have a good business case.

"If they do, we are not time-bound in terms of waiting until the spin-offs occur," Slattery said.

More details in https://www.reuters.com/business/aerospa...021-11-15/

[weijian]

Not the 1st time where we have heard of "moving goal posts". BOD will claim that they do so, to prevent employees from been "demotivated or demoralized". Normally this is reserved for those where the BOD is controlled by the majority shareholder. For GE's case, rather than act as a case of check and balance, is the BOD actually too compliant against the executive?

Corporate Excess

In August 2020, the board amended Culp’s contract, bestowing on him a “Leadership Performance Share Award” that lowered the benchmark against which his progress would be measured to the then-much reduced share price of $53. Culp still stood to reap a fortune for scoring corporate touchdowns, but the goalpost had been moved significantly closer, the prior distance now being considered too difficult in light of the “unprecedented challenges” faced by the beleaguered Mr. Culp.

As a first installment, Culp would receive $47 million should the stock recover to $80 (rather than, as before, to $149). The new target was actually below where the stock had stood when Culp was hired. And Culp would need to hit the target for only thirty days. Later in 2020, with most shareholders still wallowing in losses, the $47 million was his.

https://rogerlowenstein.substack.com/p/corporate-excess