Apr
23
GE’s Immelt: Housing Great Depression
Filed Under Housing News
General Electric CEO Jeff Immelt says the housing crisis is the worst since 1930s’ economic depression.
ERIE, Pa. (AP) — General Electric CEO Jeff Immelt said the U.S. economy is in the worst condition since the burst of the dot-com bubble and that housing hasn’t been in such dire straits since the Great Depression.
Less than two weeks after the conglomerate shocked investors with a profit warning and revealed that its first-quarter earnings had unexpectedly fallen 6%, Jeff Immelt said things could get worse for the U.S. economy.
Immelt told shareholders at the company’s annual meeting that because of current conditions, GE (GE, Fortune 500) will increase its planned cost cutting from $2 billion to $3 billion.
“We are in the toughest economy since 2001 and the worst housing crisis since the Depression,” Immelt said. “Banks have written off more than $250 billion… Days of easy credit have turned into months of no credit at all. While I am confident about the economy long term, we could see even more difficult times ahead.”
GE’s first-quarter earnings report triggered a plunge that wiped more than $46 billion from its market capitalization and saw the company’s stock fall nearly 13%.
Many investors felt broadsided because GE said as recently as March that the company would see profit and revenue growth of 10% in 2008. The company now projects earnings to be 5% or less.
Immelt said GE executives are making changes in the company’s operations and planning, including more internal forecasts, with Immelt reviewing the reports weekly.
“This will ensure that there are no time gaps between how we describe the company and what we deliver,” he said.
Immelt defended the company’s performance and brushed aside the mention of spinning off businesses from the industrial and commercial conglomerate.
“In the last five or six years, I’ve sold $50 or $60 billion of business,” he told reporters Wednesday. “I’ve acquired $70 or $80 billion of business. This has probably been the most active portfolio change in the history of the company and it would be hard to find another industrial company that’s done anything close to what we’ve done.”
Under Immelt, GE sold off the company’s plastics and insurance businesses and has been increasing its market share in emerging markets, such as Asia and Latin America.
Immelt said he accepts criticism from analysts who said the quarterly results damaged his credibility. Until the earnings report, GE regularly met its targets.
“My track record over a long period in this company has been good,” he said. “I expect it to be good in the future. You don’t do a job like this if you can’t take a punch.”
Fairfield, Conn.-based GE is having its annual shareholders meeting in Erie, the site of its transportation business headquarters.
GE shares rose 29 cents to $32.62 Wednesday.
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