STREAMING NOW: Watch Now

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 2:53 PM
Updated: Jul 20, 2018 2:53 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.

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 61839

Reported Deaths: 1707
CountyConfirmedDeaths
Hennepin19569839
Ramsey7717268
Dakota4507106
Anoka3752115
Stearns290920
Washington216345
Nobles17686
Olmsted176723
Scott159020
Mower11052
Rice10388
Blue Earth9325
Wright8975
Carver8783
Clay78840
Sherburne7328
Kandiyohi7021
St. Louis57319
Todd4292
Lyon4253
Freeborn3601
Steele3512
Nicollet34713
Watonwan3230
Benton3203
Winona26416
Beltrami2440
Crow Wing23814
Le Sueur2261
Martin2095
Chisago2041
McLeod2020
Goodhue1999
Otter Tail1983
Cottonwood1780
Becker1611
Pipestone1589
Polk1554
Waseca1490
Itasca14612
Douglas1441
Carlton1420
Unassigned13141
Dodge1290
Isanti1290
Pine1290
Murray1241
Chippewa1071
Morrison931
Wabasha930
Brown892
Faribault890
Meeker872
Rock850
Sibley842
Koochiching793
Jackson790
Pennington751
Cass742
Mille Lacs723
Fillmore670
Renville665
Lincoln580
Grant563
Swift551
Yellow Medicine520
Roseau520
Pope480
Houston420
Aitkin411
Norman400
Kanabec371
Redwood360
Hubbard350
Wilkin343
Marshall290
Wadena270
Mahnomen271
Red Lake240
Big Stone220
Lake210
Stevens180
Clearwater140
Traverse110
Lac qui Parle80
Cook50
Lake of the Woods40
Kittson30

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 49380

Reported Deaths: 942
CountyConfirmedDeaths
Polk10444208
Woodbury373452
Black Hawk315766
Linn242888
Johnson211819
Dallas189835
Buena Vista179412
Scott174314
Dubuque169831
Marshall145026
Pottawattamie133228
Story117315
Wapello90533
Muscatine85148
Webster8268
Crawford7313
Sioux6433
Cerro Gordo63417
Warren5721
Tama55429
Jasper48127
Wright4751
Plymouth47011
Clinton4164
Dickinson3844
Louisa37814
Washington30510
Boone2623
Hamilton2511
Franklin24512
Bremer2307
Clarke2043
Clay2011
Carroll1942
Emmet1934
Des Moines1872
Shelby1861
Hardin1840
Marion1750
Poweshiek1608
Benton1601
Floyd1582
Allamakee1564
Jackson1561
Mahaska14217
Guthrie1355
Cedar1341
Jones1332
Buchanan1291
Henry1274
Madison1252
Butler1252
Hancock1212
Lee1183
Humboldt1181
Pocahontas1172
Delaware1171
Lyon1152
Harrison1101
Cherokee1101
Clayton1063
Taylor1000
Winneshiek971
Iowa971
Page950
Monona910
Kossuth900
Mills890
Palo Alto880
Jefferson870
Calhoun862
Winnebago860
Sac860
Fayette850
Osceola840
Grundy801
Mitchell790
Cass791
Union781
Monroe748
Lucas734
Worth670
Davis612
Montgomery604
Chickasaw550
Appanoose513
Howard500
Fremont430
Greene430
Keokuk371
Van Buren361
Ida310
Adair300
Audubon291
Decatur250
Ringgold231
Wayne201
Adams160
Unassigned10
Rochester
Scattered Clouds
73° wxIcon
Hi: 80° Lo: 63°
Feels Like: 73°
Mason City
Broken Clouds
78° wxIcon
Hi: 81° Lo: 64°
Feels Like: 80°
Albert Lea
Overcast
64° wxIcon
Hi: 81° Lo: 65°
Feels Like: 64°
Austin
Clear
73° wxIcon
Hi: 82° Lo: 65°
Feels Like: 73°
Charles City
Few Clouds
75° wxIcon
Hi: 81° Lo: 65°
Feels Like: 75°
Sunny start to Wednesday before more rain chances arrive
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Sean's Weather 8/12

Image

More students enrolling Pine Island

Image

Rochester's Ronald McDonald House adapting to new normal

Image

Shots fired at Rochester apartment complex

Image

Big Rochester Races on MN Primary Ballot

Image

Jump Bikes in Rochester

Image

Coaches react to Big Ten cancellation

Image

Wind Farm Project Update

Image

Biden chooses a running mate

Image

The impact of a pandemic on a primary

Community Events