General Electric Co.'s fourth-quarter net income fell 46 percent, weighed down by its ailing financial business and capping a difficult year for the industrial giant.
The iconic American company that makes everything from refrigerators to jet engines, owns a television network, and runs a huge loan and lease business, has struggled with tumbling profits at its finance arm, a dropping stock price and loss of investor confidence.
Shares fell 94 cents, or 7 percent, to $12.54 in morning trading Friday after the earnings report.
Investors worry GE will cut its dividend or lose its prized 'AAA' credit rating on account of a brutal recession that has crimped lending at GE Capital and stung its industrial and entertainment businesses.
But the company on Friday reaffirmed plans to both pay the $1.24 dividend and defend the rating.
"We run the company to have a Triple-A credit rating, and we have significantly strengthened our liquidity position," said Chief Executive Officer Jeff Immelt. "We believe the GE dividend provides our investors with a solid return in this uncertain time."
GE reported earnings of $3.65 billion, or 35 cents per share, after paying preferred dividends. That was down from $6.7 billion, or 66 cents per share, a year earlier.
Results included $1.5 billion in charges related to the restructuring of GE Capital and increased reserves. The company also recorded $1.38 billion in tax benefits during the quarter.
The Fairfield, Conn.-based company embarked on a restructuring program last year, cutting the size of GE Capital and slashing jobs at the lending unit and on GE's industrial side. Its industrial units include health care, energy, transportation and consumer products. GE also owns NBC Universal, the parent company of the NBC network.
Amid diminished Wall Street expectations, GE's earnings from continuing operations before preferred dividends matched the consensus of analysts polled by Thomson Reuters for 37 cents a share.
Quarterly revenue slipped 5 percent to $46.2 billion.
In GE's industrial division, sales in the aviation unit that makes jet engines rose 2 percent to $5.1 billion. The transportation unit, which makes equipment like locomotive engines, saw sales rise 20 percent to $1.4 billion. Sales of energy infrastructure equipment, which includes turbines for power plants, rose 21 percent to $11 billion. The medical equipment making health care unit posted a 3 percent decline in sales to $4.8 billion.
But GE Capital, which makes consumer and commercial loans, was hit by the crisis that left many banks and financial institutions short of cash and stuck with bad debts. Earnings at GE Capital fell to $1.03 billion from $3.16 billion a year earlier. GE Capital has joined federal programs designed to help lenders raise cash and the company expects its credit losses from bad loans to rise to $9 billion this year.
GE company says it expects to have the cash available to make its dividend payments. But analysts point out it plans to raise that money from its industrial businesses that could be hit hard by the global slowdown that could further spending by consumers on GE appliances and big investors on items like GE energy turbines.
The company's top credit rating will also likely face close scrutiny from ratings agencies like Standard & Poor's, which warned last month that there is a one-in-three chance GE will lose 'AAA' rating in the next two years, largely due to GE Capital's woes.
For all of 2008, GE earned $17.3 billion, or $1.72 per share, down 22 percent from a year earlier. Company revenues grew 6 percent during 2008 to $182 billion.
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