During a conference call with investors Tuesday, Chief Financial Officer Jamie S. Miller said that the charge, tied to acquisitions in GE’s power businesses, had prompted the Securities and Exchange Commission to expand its investigation. The Justice Department is also looking into the charges. The company reported a net loss of $22.8 billion in the third quarter because of the charge and said it is cooperating with both federal agencies in the investigation.
The SEC had already been investigating GE over how the Boston-based company recognized revenue from long-term service agreements for the maintenance of power plants, jet engines and other industrial equipment it sells. The probe is also looking into whether there was a miscalculation in one of GE’s insurance subsidiaries that cost the company $15 billion, as well as a $6 billion charge, announced in January, related to the company’s financial unit, GE Capital.
During the call, Culp faced investors for the first time since taking the reins at GE and sought to reassure them about GE’s future, despite its litany of struggles. “Our results are far from our full potential,” Culp said. “We will heighten our sense of urgency and increase accountability across the organization to deliver better results.”
Revenue in the third quarter had fallen 4 percent, to $29.57 billion, according to the company’s earnings report Tuesday, and the company lost $2.63 a share during the same period.
“The company perhaps doesn’t enjoy the reputation that it once did in certain quarters,” Culp said. “There are good things going on here, but that doesn’t necessarily take away from today’s headlines. But there are things we can do to build on this team and these assets.”
To recover cash flow, the company announced it will slash its dividend from 12 cents per share to a penny a share in December, which will allow GE to retain about $3.9 billion in cash. It’s a stark symbol for GE’s struggle, as it was once known for its stable dividends.
The cut in dividends was worse than analysts had predicted, but it’s just further evidence of the company’s steep decline, said Ivan Feinseth, chief investment officer at Tigress Financial Partners. “Unfortunately GE is no longer the beacon of industrial and financial leadership that it once was,” Feinseth said.
It’s not unusual that Culp’s first public debut was colored by bad news, Feinseth said. When leadership changes hands at a beleaguered company, it’s expected that the new leader will “slash and burn everything.”
“Right now, nobody cares about the current business situation,” Feinseth said. “This company is broken and in need of repair, and GE needs to make some bold moves. Everything is focused on what they’re going to do differently."
GE stock closed down 8 percent on Tuesday at $10.18 a share.