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If GE’s under pressure, what’s next?

Nancy Marshall-Genzer May 15, 2008
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If GE’s under pressure, what’s next?

Nancy Marshall-Genzer May 15, 2008
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TEXT OF STORY

KAI RYSSDAL: There aren’t many companies more iconic than General Electric. But CEO Jeffrey Immelt apparently wants to downsize. Word is GE’s selling off its appliance unit. The company wouldn’t cofirm the reports when we called them. Of course, they didn’t deny it either. Appliances are just a sliver of GE’s profits. But first-quarter earnings came in far lower than expected, so something had to give. And if a bellwether like GE is struggling, what’s it like out there for everyone else? Marketplace’s Nancy Marshall Genzer reports.


GE COMMERCIAL: When we read about the things those research people at General Electric are working on . . . [MUSIC] “There’s a great big beautiful tomorrow . . .”

NANCY MARSHALL GENZER: Things looked pretty good when GE made that presentation at the 1964 World’s Fair. But now, shareholders don’t think tomorrowland looks all that great. In the name of progress toward a higher stock price, they want GE to peel away some of its layers.

Quincy Krosby is chief investment strategist at The Hartford. She says, with a weak economy and falling profits, more and more companies will come under this kind of pressure. Krosby says it’s not unusual for shareholders to force CEOs to do a little spring cleaning during economic slowdowns.

QUINCY KROSBY: Take a look at where they’re doing well, where they’re not doing well. And basically telling CEO’s to stick to their knitting, stick to what they’re good at.

Krosby says even tight-knit companies can expect to hear demands to unravel under-performing assets. But will troubled divisions sell in a weak economy? Yes, because of the weak dollar.

DAVID WYSS: With the decline in the dollar the United States is basically having a 20 percent-off sale.

David Wyss is chief economist at Standard & Poors.

WYSS: The bottom line to the stockholder is the share price. And if those foreign buyers are offering attractive share prices, management is going to under a lot of pressure to accept the deals.

Companies from China, South Korea and Germany are said to be interested in GE’s appliance division.

I’m Nancy Marshall Genzer for Marketplace.

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