Power outage at GE

General Electric is transforming itself for the future, but the iconic company is still dogged by major problems from...

Posted: Jul 20, 2018 3:52 PM
Updated: Jul 20, 2018 3:53 PM

General Electric is transforming itself for the future, but the iconic company is still dogged by major problems from the past in its power division.

Profit at GE Power plunged 58% during the second quarter as orders for gas turbines tumbled, GE said on Friday.

The slump at GE Power, the company's largest division by revenue, underscores the challenges facing GE even as the company breaks itself apart by selling off its rail, health care, light bulb and other businesses.

GE's power struggles drove overall earnings down by 30% last quarter, offsetting strength in aviation and health care. And GE said it expects its 2018 free cash flow to be at the low end of its forecast.

After initially rising, GE shares dropped 4% on Friday. GE has lost about a quarter of its value this year.

"The biggest challenge we face continues to be working through the turnaround of our power business," GE CEO John Flannery said during a conference call on Friday.

Flannery said demand for orders has been soft, pressuring GE's cash flow and working capital.

GE Power has been caught unprepared for the rapid rise of renewable energy. Power plants are switching away from fossil fuels like coal and natural gas in favor of wind and solar.

Related: Meet the new GE: It's a shell of its former self

The good news is that many on Wall Street feared worse results from the company, which was recently kicked out of the Dow. GE managed to grow overall revenue by 3%, driven by strength in aviation and oil and gas. And despite the continued trouble at GE Power, management maintained its earnings outlook for the rest of the year.

GE is also making progress with slashing costs in an effort to stabilize the company. GE said it has already cut $1.1 billion of industrial costs this year and it's on track to exceed its goal to save $2 billion. Much of that belt tightening has occurred at GE Power, which announced plans late last year to cut 12,000 jobs.

Flannery pledged to fix GE Power urgently, but he cautioned that it won't be a smooth or quick turnaround.

"It's going to be a multi-year fix, with some volatility," he said.

Of course, power isn't the only part of GE that's hurting. Profit declined by double digits as GE's locomotive division as well. Even renewable energy, which is primarily onshore wind, suffered a 48% plunge in earnings as orders declined and prices slumped.

The bright spot at GE remains aviation, which makes and services jet engines. Profit, revenue and orders all rose solidly. GE said equipment orders spiked 62% thanks to strong demand for its GEnx and LEAP engines.

Related: Inside the dismantling of GE

GE downplayed concerns about the trade war with China, where the company makes about $7 billion per year in revenue. GE also imports roughly $2.9 billion of parts from China that are ultimately re-exported as MRI machines, jet engines and wind turbines.

"We don't see a major impact yet financially," Flannery said, adding that he's "watching this carefully."

GE estimates that the gross impact from tariffs could be $300 million to $400 million, before the company takes mitigating steps to shield itself. One option: GE said it could adjust its supply chain to avoid tariffs.

While GE is "built for fair and open trade," Flannery said he hopes and expects the trade standoff to "reach a sensible negotiated conclusion."

Last month, GE announced plans to shrink itself by saying goodbye to its health care, oil and gas and locomotive businesses. It was a dramatic shift for one of America's great conglomerates.

GE has promised to use the cash to pay down a mountain of debt and simplify a company that grew far too complex in recent years. At one point, GE owned everything from an appliance business and NBC to one of America's biggest banks.

"We are progressing on our plans to make GE simpler and stronger," Flannery said on Friday.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 947918

Reported Deaths: 15377
CountyCasesDeaths
Marion1291181990
Lake635721103
Allen53899761
Hamilton44082449
St. Joseph42122590
Elkhart33803491
Vanderburgh30574449
Tippecanoe26915251
Johnson23727418
Hendricks22410342
Porter21832347
Clark17562231
Madison17492385
Vigo16302285
Monroe14545191
LaPorte14389239
Delaware14183222
Howard13971273
Kosciusko11498135
Hancock10935166
Warrick10737178
Bartholomew10635170
Floyd10514208
Wayne10077226
Grant9213204
Morgan8928160
Boone8463111
Dubois7791123
Dearborn769490
Henry7691133
Noble7466101
Marshall7409128
Cass7219118
Lawrence7026153
Shelby6647111
Jackson661386
Gibson6190107
Harrison609386
Huntington604495
Montgomery5853105
DeKalb581091
Knox5535104
Miami548888
Putnam543268
Clinton537465
Whitley529354
Steuben501768
Wabash488692
Jasper483861
Jefferson474492
Ripley457777
Adams446068
Daviess4231108
Scott409165
Clay394957
White393858
Greene393392
Wells389884
Decatur388797
Fayette378578
Posey362341
Jennings356056
Washington334747
LaGrange325175
Spencer321136
Fountain318455
Randolph317190
Sullivan309449
Owen287064
Starke282864
Fulton280454
Orange277859
Jay257038
Perry254152
Carroll245229
Franklin242838
Rush237030
Vermillion235050
Parke221420
Tipton212055
Pike211740
Blackford170534
Pulaski168551
Crawford147318
Newton145845
Benton143916
Brown135846
Martin130217
Switzerland126910
Warren115616
Union98511
Ohio80511
Unassigned0482

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1390015

Reported Deaths: 21820
CountyCasesDeaths
Franklin1541781574
Cuyahoga1361632341
Hamilton989691326
Montgomery681371161
Summit569981051
Lucas51769869
Butler48139663
Stark42350983
Lorain32165539
Warren30497338
Mahoning27564643
Clermont26081297
Lake24873422
Delaware22600147
Licking20818246
Fairfield20789223
Greene20667275
Trumbull20378516
Medina20178290
Clark18235332
Richland16749236
Portage16442231
Wood15973209
Allen14405261
Miami14063261
Muskingum12976155
Wayne12234244
Columbiana12046242
Tuscarawas11248271
Marion10935150
Pickaway10642129
Scioto10585127
Erie9888171
Ross9648177
Lawrence8967125
Hancock8637143
Ashtabula8509187
Geauga8272156
Belmont8262188
Jefferson7736175
Huron7566131
Union743951
Washington7396126
Athens712065
Sandusky6984135
Darke6884137
Knox6839122
Seneca6533137
Ashland6078115
Auglaize596888
Shelby5845104
Brown578272
Mercer565890
Crawford5591117
Defiance5579101
Madison552171
Highland550982
Fulton543583
Clinton535781
Logan520587
Preble5123111
Putnam4909107
Guernsey487664
Williams469982
Perry464454
Champaign454964
Ottawa443584
Jackson436663
Pike400745
Morrow398251
Coshocton393669
Fayette385053
Adams371575
Hardin367570
Gallia356658
Holmes3326111
Henry331869
Van Wert321471
Hocking312370
Wyandot286058
Carroll267052
Paulding247443
Meigs223042
Monroe193149
Noble174442
Morgan170329
Harrison161741
Vinton141919
Unassigned05
Fort Wayne
Partly Cloudy
66° wxIcon
Hi: 88° Lo: 62°
Feels Like: 66°
Angola
Partly Cloudy
63° wxIcon
Hi: 83° Lo: 60°
Feels Like: 63°
Huntington
Partly Cloudy
66° wxIcon
Hi: 87° Lo: 61°
Feels Like: 66°
Decatur
Partly Cloudy
66° wxIcon
Hi: 87° Lo: 62°
Feels Like: 66°
Van Wert
Partly Cloudy
75° wxIcon
Hi: 87° Lo: 60°
Feels Like: 75°
A weak cold front brings slightly cooler air to the region Tuesday.
WFFT Radar
WFFT Temperatures
WFFT National

Community Events