GE Hikes Cost-Cutting Goal to $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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