General Electric Co's Jeff Immelt planned to spend Sept. 11, his second day as chief executive of the largest company by market value, addressing 2,500 aerospace engineers in Seattle.
Instead, Immelt checked on employees' safety and ordered that emergency equipment be sent to rescue efforts in New York and Washington. He did a company-wide review and shaved US$0.04 a share from third-quarter profit estimates. GE insured the World Trade Center and the planes that destroyed the complex.
Ten days later, he reassured investors that profit this year and next will rise at least 10 percent as growth at the company's power, financing and medical-imaging businesses mitigates the effects of the terrorist attacks and a slowing economy on its other units.
After US$400 million in reinsurance losses, third-quarter profit rose 3 percent to US$3.28 billion, or US$0.33 a share. Sales dropped 8 percent.
"We didn't wake up on Sept. 12 and say `there's a recession,'" Immelt said after the investor meeting. General Electric's stock had drop-ped about 45 percent in the 12 months before Immelt reassured investors. Since the meeting, the shares have risen 28 percent and are down 31 percent in the past year.
Immelt reiterated his forecast today. General Electric shares rose US$1.03 to US$38.94.
The problem for some is, the stock's drop in the past year is deeper than that of the benchmark Standard & Poor's 500 Index.
That's because the havoc caused in the aircraft and insurance businesses is compounding concern about a recession.
"The fundamental issues are that they still have exposure to aerospace" through jet engines and leasing, said Marcy Yeamans, an analyst at Banc One Investment Advisers, which owns GE shares.
The shares posted an average annual return of 24 percent during the two-decade tenure of Jack Welch, Immelt's predecessor. Welch helped sustain 26 consecutive years of quarterly profit growth and increased the company's market value to more than US$400 billion from less than US$15 billion.
"Like any new CEO, [Immelt] has to prove himself to the Street," said Thomas Leritz, an analyst at Banc of America Capital Management, which owns GE shares.
Immelt has been quick to act. General Electric said last week it will cut as many as 4,000 jobs at its aircraft-engine business, or 13 percent of the unit's workforce, over the next several months as airlines slash flights and cancel equipment orders. That will help reduce expenses by about US$500 million at the unit, which accounts for about 8 percent of GE's revenue.
The company had been preparing for an economic slowdown for nearly a year, cutting jobs and other costs at its most economically sensitive businesses -- broadcasting, plastics, appliances and lighting.
Earnings will increase by 11 percent to US$1.41 a share in 2001 from US$1.27 a share last year, Immelt said.
That's down from the US$1.47 a share average forecast from analysts surveyed by Thomson Financial/First Call before the attacks. General Electric will give further earnings guidance for 2002 in December, he said.
"The only thing that can put my [current profit] assumptions at risk aren't necessarily economic," Immelt said. "It is some major dislocation -- oil goes to US$100 a barrel -- that a war would create. I don't know how to predict any of that."
Slower Growth Profit declined at six of the eight business segments for which the company provided third-quarter information.
General Electric continues to make acquisitions to bolster sales and profit. The company's NBC unit agreed today to buy Telemundo Communications Group Inc, the second-largest US Spanish-language broadcaster, for US$2.7 billion to increase advertising revenue.
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