Despite GE's claim that capital markets are getting better, the company is putting in place a plan to reduce its costs by $3 billion. ERIE, Pennsylvania (Reuters) - General Electric Co (GE.N: Quote, Profile, Research)
chief Jeffrey Immelt said on Wednesday U.S. capital markets have
improved since the end of the first quarter but the overall U.S.
economic picture is unchanged, and the company has raised its 2008
cost-cutting goal by $1 billion.
"The capital markets are a little better" than they were at the end
of March, when turmoil prompted by the near-collapse of Bear Stearns
Cos Inc (BSC.N: Quote, Profile, Research) made it difficult for GE to complete deals, Immelt said at the company's annual meeting.
GE's inability to close some financial asset sales at the end of the
first quarter contributed to its unexpected drop in profit, which
triggered the sharpest sell-off in its shares in two decades. Some of
these deals have now been completed, Immelt said.
"The U.S. economy hasn't gotten any worse or any better and the
global economy still seems to be pretty good," Immelt, GE chairman and
chief executive, told reporters ahead of the conglomerate's annual
meeting in Erie, Pennsylvania.
GE, the second-biggest U.S. company by market value, has raised its
2008 cost-cutting goal to $3 billion from $2 billion, Immelt said. Last
year the company cut costs by $2 billion.
GE slashed its full-year profit forecast to a range of $2.20 to
$2.30 per share -- meaning profit would be flat to up 5 percent -- in
the wake of the grim first quarter. It had previously forecast a rise
in profit of at least 10 percent.
"We are in the toughest economy since 2001 and the worst housing
crisis since the depression," Immelt told shareholders, standing in
front of a bright yellow GE-built hybrid railroad locomotive.
Asked about the slump in GE's stock and questions raised about his
credibility in the wake of the company's unexpected drop in profit this
month, Immelt said, "I think my track record over a long period of time
with this company has been good. I expect it to be good in the future.
... You don't do a job like this if you can't take a punch."
GE shares were up 33 cents, or 1 percent, at $32.66 in early trading
on the New York Stock Exchange. They are down 12.5 percent so far this
year, a steeper drop than the 4 percent slide of the Dow Jones
industrial average .DJI.
Immelt told shareholders he had started doing more frequent reviews
of GE's segments to "insure that there are no time gaps between how we
describe the company and what we deliver."
Immelt spoke in Erie, Pennsylvania, a city of about 102,000 people
in the state's far northwestern corner, where GE manufactures railroad
locomotives, engines for steamships and gear boxes used in
electricity-producing wind turbines. The Fairfield, Connecticut-based
company holds its annual shareholders meeting in a different location
each year, selecting cities where major units are based.
(Editing by Mark Porter and John Wallace)
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