WASHINGTON, February 25, 2018: As if the post Jeff Immelt General Electric (stock symbol: GE) hasn’t been confronting enough problems lately, CNBC has just posted this stunning news first reported by the Financial Times of London:
“General Electric will restate its earnings for 2016 and 2017 as it adopts a new accounting standard, according to a regulatory filing Friday.
“The updated accounting standard, which will take into account revenue from long-term contracts, will result in a 13 cent cut in reported earnings per share for 2016 and a cut of 16 cents per share for 2017, according to the company’s 10-K filing.
“The company will restate earnings when it reports 2018 results, GE said in the filing. GE reports first-quarter earnings on April 20.
“GE is adopting the new accounting standards as the Securities and Exchange Commission is investigating GE over its accounting for long-term service contracts.
“GE also is facing potential legal action by the U.S. Department of Justice over allegations that its GE Capital unit and now-defunct WMC Mortgage Corp. unit violated U.S. law in connection with subprime mortgages, according to the filing.”
Regarding GE’s apparent financial shenanigans, Deutsche Bank analyst John Inch notes
“General Electric has been ‘brushing things under the rug and leveraging aggressive accounting” for several decades…’
“One could infer the prior management basically did this to drive the … adjusted EPS [earnings per share] up as much as possible to pay themselves as much as possible.”
All this may be a surprise to long-suffering investors in GE’s common stock, but it’s no surprise to us. Former General Electric CEO Jeff Immelt was far more interested in playing politics with the Obama Administration and indulging in needless, corporate-paid globetrotting in a costly GE private jet than he was in helping GE to grow.
During Immelt’s tenure, the Great Recession problems that plagued GE Credit largely failed to receive Immelt’s proper attention. As a result, that division plagued GE’s earnings for years, a problem that persists, even though the company divested much of its financial arm.
In the public arena, Immelt was also chosen to head up Obama’s failed “jobs committee,” a presidential advisory committee that did absolutely nothing to attack the severe unemployment problem that persisted throughout the entire Obama administration.
The current news involving the restatement of GE’s earnings will very likely hit the stock hard in Monday Wall Street trading action. GE is part of the Dow Jones Industrial Average (DJIA), which won’t help that widely followed big company index in its current drive to recover from its VIX-driven early February smackdown.
It would not be surprising if, at the end of the day, ever-shrinking General Electric shares were finally ejected from the DJIA. Continually divesting itself of “weak” divisions, the company’s constant downsizing is almost certain to remove it from the roster of America’s corporate giants. That’s a great shame. But much of it can be pinned on Jeff Immelt, GE’s amazingly ineffective, longtime CEO.
The casual, careless destruction of one of America’s oldest and greatest companies by Jeff Immelt should focus investors once again on the lack of responsiveness and creativity constantly on display today in this country’s major corporate boardrooms.
Cozy, overpaid and underwhelming board members are far too often handpicked cronies of the current CEO and do little to assure the prosperity of their company, the continued employment of the company’s workers, and the value of their company’s common stock.
Jeff Immelt and the wreckage of the one-time proud U.S. corporate giant he led to ruin is yet another reminder that corporate America, like Washington, has become a crony-infested swamp. It’s about time that swamp was drained. But, unfortunately, that still might not be enough to save what remains of once-proud General Electric.