PELTZ'S TRIAN FUND TO INVEST $2.5B IN GE

Original Story: cnbc.com

Trian, the $13 billion activist hedge fund run by Nelson Peltz, on Monday unveiled a roughly $2.5 billion investment in General Electric.

"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns, "Nelson Peltz, CEO and a founding partner of Trian, said in a statement. "Our recent discussions with Jeff and his team have solidified our belief that they are highly motivated to fully deliver on GE's transformation and share much common ground with Trian on ways to improve long-term shareowner value." A San Diego securities lawyer is reviewing the details of this case.

The GE investment is the largest in Trian's history, but unlike many of the fund's more combative positions, the stake in GE and Trian's approach towards it is being described as supportive of current management.

Trian, which has been in active discussions with GE's chief executive Jeffrey Immelt, has not asked the company for a board seat and has made it clear it supports the current strategy being pursued by Immelt.

That strategy has focused GE as an industrial infrastructure company that will derive more than 90 percent of its earnings from those businesses once the divestment of GE Capital is completed in the next two years.

Trian believes GE's share price does not reflect the drastic change in its profile or the consistent earnings growth that change will bring.

Ed Garden, Trian's chief investment officer and a founding partner, said in a statement: "Trian believes GE has significant long-term potential and that its implied target value per share, including dividends,could be $40 to $45 by the end of 2017 based on our view that GE can deliver EPS of at least $2.20 in 2018." An ESOP lawyer is following this story closely.

GE's stock price continues to trade well below the level it was at prior to Immelt's ascension to CEO more than fourteen years ago and has a offered total return of only 10 percent over the past 10 years. (Get the GE latest quote here.)

Those lousy numbers are not lost on Immelt, who has been frustrated with the relatively tepid response GE shares have received from investors since the company announced its decision to largely exit its financial business last Spring.

It was GE's decision to divest most of the assets of its GE Capital unit that attracted Trian to its stock.

Trian's investment, while welcomed by GE, is not without risk for current management. While Trian has taken a number of so-called friendly positions through the years, it is far better known for its fights.

Its most recent battle, with chemicals giant Dupont, left Trian without any board seats after a bruising proxy fight that could be revisited in the not too distant future.

In its paper explaining the GE investment, Trian asks that management continue cost reductions so that operating margins reach at least 16 percent by 2018. It asks management to commit to roughly $20 billion of incremental leverage and explore share repurchases beyond GE current guidance and it notes that, while it did not ask for a board seat, it "expects management to deliver on its commitments."

GE has not publicly shared margin targets for 2018 or discussed further repurchases of its shares beyond the current plan.

In a statement on Monday, GE's Immelt said: "We welcome Trian's significant investment in the Company. GE maintains an open dialogue with our shareholders and enjoys productive, collaborative relationships with them. I have known Trian Principals Nelson Peltz and Ed Garden for many years. Trian has a strong track record of working with companies to build long-term shareholder value, and has been an engaged shareholder. We appreciate their perspectives and look forward to a constructive ongoing dialogue with Trian as we execute our strategy to reshape the Company.

Immelt added: "GE is focused on improving margins and returns,reducing costs and the size of corporate, returning capital to shareholders and realigning our portfolio, most recently with the announced exit of most of GE Capital. Significantly, we have a plan to return more than $90 billion to investors through 2018 and are on track to complete our goal of closing $100 billion of GE Capital asset sales in 2015. We are transforming GE into a focused infrastructure and technology company, leading the intersection of the physical and analytical worlds. "Our businesses are performing well in a volatile environment. In the second-quarter earnings announcement, GE raised its full-year Industrial operating earnings per share guidance to $1.13-1.20 and is on track for that goal. We are confident our strategy will further enhance shareholder value and continue to position GE for long-term growth and success."

More On GE

CLEVELAND, Ohio -- General Electric announced Wednesday that it will start a new company called Current, an energy company that integrates LED, solar, energy storage and electric vehicle businesses. An environmental lawyer represent clients in litigation and regulatory and permitting issues.

Maryrose Sylvester, who is president and CEO at GE Lighting at Nela Park in East Cleveland, has been selected to lead the new enterprise, according to a press release from GE. Sylvester will continue to oversee the local GE Lighting operations as well. 

It is unclear at this time what other impact, if any, that Current may have on the East Cleveland icon.

"We are still working through the details, but there are no plans to make any significant changes at this time," said Christopher Augustine, director of global communications and public affairs for GE Lighting. "Over the coming months we will work through the transition plans and share updates as appropriate."

Sylvester has been leading the 100-plus-year-old GE Lighting, a $3 billion enterprise, since 2011. In her new role, she is expected to scale Current from a $1 billion startup to a $5 billion business by 2020, the press release read.

Current will be headquartered in the greater Boston metropolitan area, with an additional presence in the Silicon Valley. It is expected to create roughly 200 new jobs focused on software, selling and energy product management over the next few years.

"Current combines GE's products and services in energy efficiency, solar, storage, and onsite power with our digital and analytical capabilities to provide customers – hospitals, universities, retail stores, and cities – with more profitable energy solutions," said Jeff Immelt, chairman and CEO of GE in a written statement. "The creation of a new company within GE reinforces our commitment to take energy to the next level, focusing on custom outcomes for our Commercial & Industrial customers, municipalities and utility partners, and delivering a platform that can be upgraded as technology advancements are made."

Current will begin with more than $1 billion of revenue and build on GE's legacy in energy and deep roots in technology.

Walgreens, Simon Property Group, Hilton Worldwide, JPMorgan Chase, Hospital Corporation of America (HCA), Intel and Trane, a brand of Ingersoll Rand, are already signed on as Current customers, the press release read.

Business Briefs

The Detroit News

Midland -- Dow Chemical Co., the largest U.S. chemical maker, reported Wednesday that its first-quarter profit surged more than fivefold to $718 million from a year earlier.

First-quarter net income rose to $551 million, or 41 cents a share, from $24 million, or 3 cents, compared with a year ago, Dow said.

"This quarter was indeed a pivotal point in giving the world a glimpse of our earnings' power," Dow CEO Andrew Liveris said in a conference call.

Federal-Mogul sales surge 20 percent

Auto parts supplier Federal-Mogul Corp. posted a $17 million first-quarter profit as sales surged 20 percent.

Net income was 15 cents a share, compared with a loss of $101 million, or $1.02, a year earlier, the Southfield-based company said Wednesday. The per-share results, excluding a charge for a Venezuelan currency devaluation of 35 cents, beat the 22-cent average of three analyst estimates compiled by Bloomberg.

Sales rose to $1.49 billion, benefiting from improved demand worldwide.

Mitsubishi, Peugeot reach SUV deal

Mitsubishi Motors Corp. and PSA Peugeot Citroën announced Wednesday that they have come to an agreement to collaborate on a compact SUV.

These new compact SUVs will have specific designs for Peugeot and Citroën while sharing many components with the Mitsubishi vehicle, named RVR in Japan and ASX in Europe.

Obama to appoint Yellen to Fed board

President Barack Obama today will name Janet Yellen as vice chairwoman of the Fed board of governors, according to two people familiar with the decision.

Obama also will name Sarah Bloom Raskin, Maryland's commissioner of financial regulation, and Peter Diamond, an economics professor at the Massachusetts Institute of Technology, for the two remaining open seats on the seven-person board, according to the people, who spoke on condition of anonymity before the announcement.

The nominations are subject to Senate confirmation.

Fed vows to hold line on rates for 'extended' period

Washington -- The Federal Reserve in a 9-1 decision Wednesday retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery.

GE glimpses light after conglomerate's cloudy year

Houston -- General Electric says the broader economy and its own business have stabilized, and that the "clouds are breaking" after one of the worst years ever for the conglomerate. The company, at its annual meeting in Houston, is telling investors that key economic indicators like housing and unemployment have stabilized, and that capital markets are improving. General Electric Co . says losses have peaked in its GE Capital lending unit and that the division should return to profit growth soon. GE Capital was the source of many of the company's problems last year, hit by the downturn in areas like credit cards, mortgages and commercial real estate.

Google's brand value of $114B tops global list

Google Inc . topped the 2010 BrandZ ranking of the 100 most valuable global brands by Millward Brown Optimor, with an estimated brand value of $114 billion. International Business Machines Corp . and Apple Inc . advanced to second and third place from fourth and sixth last year. Research In Motion Ltd .'s BlackBerry moved two spots to 14th place. Technology companies accounted for 6 of the top 10 brands. Apple, Hewlett-Packard Co ., Amazon .com Inc ., Verizon Communications Inc . and Baidu Inc . all gained more than 25 percent in brand value.

GE Investing in Wind, Wastewater Segments

The Wall Street Journal

General Electric Co. (GE) plans to double its research and development spending to $10 billion for its Ecoimagination program over the next five years, with an eye on growth in wind turbines and wastewater treatment, an executive from the industrial conglomerate told a Wall Street audience.

With Ecoimagination drawing $5 billion in research and development funding since 2005, General Electric now is setting 2010-2015 goals for the program, a corporate initiative aimed at so-called clean technology to help reduce the carbon footprint of a wide swath of industrial activities.

Steve Fludder, vice president, Ecoimagination for GE, said the Dow Industrials component sees a "huge opportunity" for offshore wind development in Europe, but he was vague on its deployment here.

"It's odd that it's not a big market in the U.S. yet," he told institutional investors Tuesday at the Jefferies Global Clean Technology Conference at the Mandarin Oriental Hotel. The conference featured several dozen companies ranging from giants like General Electric and Duke Energy Corp. (DUK) to smaller firms such as solar panel installation specialist, SolarCity.

GE announced plans last August to buy SanWind Group as a way to put its muscle behind offshore wind, Fludder said.

While several offshore wind projects have been proposed in the U.S., no construction has begun yet. A project off the coast of Cape Cod called Cape Wind has drawn a prolonged legal battle that could be resolved this year.

Meanwhile, GE said it sees an opportunity to use its technology in the energy business both for reduced emission coal plants and for treatment of wastewater from hydraulic fracturing to boost oil and gas production.

Asked about opposition to hydraulic fracturing (fracking) from residents in upstate New York, Fludder said the wider use of the practice will take time.

"This isn't going to happen overnight," Fludder said.

Fludder said GE plans to ship turbines this spring to Duke Energy's Edwardsport Station in Knox County, Indiana. The plant will deploy coal integrated gasification combined cycle technology to reduce emissions.

He also said GE is working on a model home with geothermal technology and other innovations to reduce its energy use from the power grid to zero.

GE is also making venture investments in smaller companies, such as its equity stake in lithium ion battery maker A123 Systems Inc..

While conglomerates such as GE figure prominently in the clean technology movement, plenty of start-up companies are touting their wares.

David Arfin, vice president of strategy for SolarCity, said the company has been winning new customers in Texas and Colorado, on top of its presence in Arizona, Oregon and California.

The company has also drawn a high-profile investor, Elon Musk, co-founder of PayPal and chief executive of SpaceX, a space launch vehicle company.

A large chunk of SolarCity's customers use power-purchase agreements to get solar panels installed, Arfin said. Instead of customers paying for solar panels, SolarCity installs them and then charges customers for the electricity.

The arrangement eliminates the big upfront costs and maintenance responsibilities of owning solar panels, he said. Federal tax credits, state and local government rebates, and utility purchases of the power help reduce costs as well, he said.

SolarCity installed a 700-kilowatt system at the EBay Inc. (EBAY) office in San Jose, as well as a six-megawatt system for Davis-Montham Air Force Base in Tucson, Ariz.

Arfin said the appeal of solar energy goes beyond its roots as an alternative energy touted in the 1970s by anti-establishment types. Now, conservative groups such as the U.S. military and the Goldwater Institute support solar power as a way to improve America's energy independence, he said.

He said the company could benefit from wider use of the Property Assessed Clean Energy, or PACE, programs, which allow private property owners to finance energy-efficiency and renewable-energy projects through their property taxes.

"It would be great for our business," said Arfin. "Lots of states are talking about it."

SolarCity plans to expand its footprint to as many as 10 states in 2010.

GE's CEO Jeff Immelt Declines Bonus for 2nd Year

USA Today

General Electric said Friday that Chief Executive Jeffrey Immelt did not receive a 2009 bonus, the second straight year he gave up extra pay as the industrial and financial conglomerate struggled with one of its worst years on record.

GE's board of directors agreed to Immelt's request not to grant him a bonus even though it concluded he had performed well during a brutal year for the company, according a company filing with the Securities and Exchange Commission. Immelt's last bonus was in 2007 and amounted to $5.8 million.

Last year was painful for GE, which makes everything from kitchen appliances to power plant turbines.

The company's shares fell 80% early in 2009 before recovering somewhat. GE lost its top credit rating due to the struggles of its GE Capital lending unit. Immelt and the GE board cut GE's dividend by 68% to conserve cash and decided to take part in a federally backed program when credit dried up.

"Jeff recognizes that it was a challenging year in which he had to make some difficult decisions that he is convinced were in the best interests of GE but that can only be assessed over a period longer than the last 18 months," GE spokeswoman Anne Eisele said, explaining Immelt's decision not to take a bonus.

However, GE did not leave Immelt empty-handed. He was paid a $3.3 million salary, the same as a year ago, and granted him 150,000 performance share units worth $1.8 million that will convert to GE stock if the company meets certain financial goals. GE also gave Immelt 2 million in stock options Thursday worth between $7 million and $8 million, though those options do not appear on his 2009 pay package.

Overall, Immelt's 2009 pay fell slightly to about $5.6 million, from $5.7 million in 2008. It also fell below the compensation of the four other top GE executives listed on GE's proxy, who all received bonuses.

In a letter to GE shareholders, Immelt said that the "world has been reset" by the sharp economic decline over the past two years. GE is in the process of cutting down the size of GE Capital, which once made up half of the company's overall profits but is still saddled by a big number of bad loans.

GE, which is based in Fairfield, Conn., has turned to its industrial divisions, which make jet engines, oil and gas drilling equipment and power plant turbines to lead it out of the recession. It has also reached a deal with cable operator Comcast to eventually sell its majority stake in NBC Universal, which includes the NBC network.

"GE must be an industrial company first," Immelt wrote.

GE expects that 2010 profits will be roughly flat with the $11 billion it earned in 2009, which was down 37% from 2008.

The company forecasts a growth in earnings beginning in 2011.

The AP's calculations of total pay includes salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations exclude changes in the present value of pension benefits, and they sometimes differ from totals companies list in the summary compensation table of proxy statements filed with the SEC.

Korea's KEPCO Wins Nuclear Contract Over GE, Hitachi

The Economist

IT IS usually the northerly of the two Koreas that attracts attention for its nuclear prowess. But on December 27th a South Korean consortium seized the limelight by winning a $20 billion contract to build four nuclear reactors in the United Arab Emirates. The consortium, led by Korea Electric Power (KEPCO), a state-controlled utility, could earn another $20 billion running the plants over their projected lifespan of 60 years.

Competition for the contract had been stiff. GE and Hitachi, two engineering giants, had launched a joint bid, as had a consortium led by France’s nuclear champion, Areva. France’s president, Nicolas Sarkozy, had lobbied energetically on behalf of the latter group. But South Korea’s president, Lee Myung-bak, was equally keen. As a former boss of Hyundai Construction, he has first-hand experience both of vying for contracts in the Gulf and of building nuclear plants. Mr Lee is said to have promised to share some tips on boosting manufacturing, a fond ambition of the Emirates.

But the chief allure of the Korean bid was price. It was reportedly billions of dollars cheaper than the others, albeit for smaller and less hardened plants. KEPCO’s nuclear subsidiary, which runs 20 nuclear plants in South Korea and plans to build 20 more, has a record of building reactors quickly and running them efficiently—unlike many of its Western counterparts. “We’re cheap, durable and dependable,” says Kevin Kang of KEPCO, which is also hoping to build reactors in India, Jordan and Turkey among other places. Although the consortium includes Westinghouse, a subsidiary of Toshiba of Japan, most of the technology is Korean. In developing countries, at least, the West’s nuclear giants face a formidable new rival.

GE Having A Yard Sale

Forbes

Forget growth--General Electric's Jeff Immelt is on a mission to raise cash now.

If General Electric combines its NBC Universal entertainment unit with cable outfit Comcast, it will become the biggest example of what is becoming Chief Executive Jeffrey Immelt's signature strategy: divestiture.

Where he once boasted about growth, Immelt is now busily selling off divisions to raise cash and reduce debt at the conglomerate's $658 billion (assets) finance arm. He's not in a position to extract good terms from the buyers.

Take the possible NBC/Comcast transaction: GE won't talk, but the company reportedly would contribute NBC Universal, with $3.1 billion in pretax profit last year and an estimated value of $30 billion, for a 49% interest in a joint venture with Comcast. Comcast's investment would be cash and programming assets worth $10 billion. Benefit to GE: taking $2 billion of NBC debt off GE's balance sheet.

Exchanging $30 billion worth of assets for a minority stake in a $40 billion business doesn't seem to make much sense--unless, perhaps, you're desperate. That's the take of Nicholas Heymann, a longtime GE analyst now with Sterne, Agee & Leach. "This is a housecleaning exercise going on," says Heymann, a onetime GE employee and former Prudential Securities analyst who has covered the company for 26 years.

Ever since the Jack F. Welch years in the 1990s, GE's finance arm took advantage of steadily falling interest rates and its seemingly bulletproof triple-A bond rating to borrow money and invest it in loans and acquisitions. Some of the borrowed money flowed back to the industrial side as dividends--$7.3 billion in 2007--that helped the parent pay its own dividends to shareholders.

All that ended with the credit crunch, when GE was forced to reduce its reliance on short-term commercial paper and turn to two saviors (Berkshire Hathaway and the federal government) for folding money.

Cable-TV, Film Lift Profits For News Corp.

Wall Street Journal

News Corp.'s net income climbed 11% in the latest quarter, as gains in its cable-television networks and film business offset declines at its newspaper and broadcast-TV divisions.

Reflecting what media executives say are improving but still cautious conditions in advertising spending and the economy, News Corp. expanded the range of its earnings guidance for its full year, ending next June.

The New York-based media company said it expects profits to increase in a percentage range from the high single digits to the low double digits, excluding special items. Three months ago, News Corp. said it expected profits to rise by a high-single-digit percentage.

News Corp.'s broadcast-TV business isn't doing as well as 

its cable-TV. Above, 'So You Think You Can Dance.'

Economic conditions are "clearly in better shape than they were a year ago," though a recovery is still a "little fragile," Chairman and Chief Executive Rupert Murdoch said on a conference call.

News Corp., which owns The Wall Street Journal, reported net income of $571 million, or 22 cents a share, for its fiscal first quarter, ended Sept. 30. A year earlier, net income was $515 million, or 20 cents a share. The year-earlier results also included a $422 million write-down of News Corp.'s investment in a German TV company now known as Sky Deutschland. Revenue fell 4.1% to $7.2 billion.

The cable-TV division posted another strong performance. Gloom continued, however, for the broadcast TV and newspapers business. In general, results were helped by cost cutting at several businesses.

As advertising spending has eroded, News Corp. businesses across the glob have stressed alternative ways of making money. In the U.S., News Corp. is pressing cable- and satellite-TV companies to pay cash fees for the rights to pipe the Fox network into people's homes. Traditionally, network owners haven't been paid cash for their broadcast networks.

Mr. Murdoch said the company may not make a self-imposed deadline of next summer to start charging user fees to access all the company's news Web sites. Analysts say it may be difficult to retain ad revenue if subscribers flee paid Web sites for free alternatives.

Operating income at the film-and-TV production unit rose 56%. Box office returns from the latest installment of the "Ice Age" series and DVD sales of the most recent "X-Men" movie helped drive the increase. The year-earlier period also included a weaker slate of films.

Operating income rose 41% for News Corp.'s cable channels, which continue to benefit from higher fees paid by cable- and satellite-TV companies. Advertising sales slipped for the cable channels from a year earlier, however, as they did in the prior quarter. Investors worry the fees may not have much room to grow, removing a major growth engine for the company.

News Corp. executives said international cable channels are a new growth area.

At News Corp.'s broadcast-television division, which includes the Fox network and local TV stations affiliated with Fox, operating income dropped by about half to $38 million in the quarter. News Corp. executives said trends for local television stations are improving from a year earlier, when Mr. Murdoch said "business just stopped" at the height of the financial crisis.

The newspapers unit posted an 81% drop in operating profit. Reduced expenses couldn't offset steep ad declines. In addition to The Journal, News Corp. publishes the New York Post in the U.S., four U.K. national papers and a string of papers in Australia. Mr. Murdoch said The Journal is profitable but "barely."

He also said the company plans to keep "absolute control" of the name and content of its Dow Jones Indexes business, which News Corp. has put up for auction. He said he couldn't comment on whether the company would merge Dow Jones Indexes with another index.

The division housing the MySpace social-networking site posted a loss as ad sales fell. MySpace has slashed its work force, installed new management and shifted tack to focus on its online video, games and music offerings as it faces competition from Facebook and other popular Web hangouts.

"It's clearly still a work in progress," said Chase Carey, News Corp.'s president and chief operating officer, said on the conference cal.

News Corp. has had preliminary discussions about a deal to buy at least parts of NBC Universal, an alternative to Comcast Corp.'s negotiations to acquire a controlling stake in the TV-and-movie company from General Electric Co. Mr. Murdoch said on the call Wednesday that the company wasn't interested in NBC "as such." "When things come around, we'll kick the tires, but we're not in any talks with anybody at the moment," he said.

Comcast and GE, which is the majority owner of NBC Universal, have worked out the general outlines of a deal, according to people familiar with the matter. An announcement could be ready as early as next week or the week after, those people and others familiar with the talks say.

Real Estate Portfolio Has GE Investors Fretting

Reuters

General Electric Co's $84 billion real estate portfolio remains a worry for investors, who wonder if the conglomerate will have to take big write-downs to reflect the lower value of real estate debt and equity holdings.

The GE Real Estate unit was the only GE Capital business to post a loss in the latest quarter.

"People are worried about commercial real estate," said Russell Croft, vice president and portfolio manager of Croft-Leominster, which owns 263,000 GE shares.

"I want to hear what they're doing to shrink GE Capital and get more detail on the real estate (holdings)," Croft said. The company has a strong industrial business but "cleaning up GE Capital" was key to extending GE's recent share rally.

Shares of GE, the biggest U.S. conglomerate, fell 5 percent Friday as its quarterly sales disappointed Wall Street even as its profit topped expectations.

GE Real Estate, part of the GE Capital division, posted a loss of $538 million in the quarter, double the loss in the preceding quarter. By comparison, GE Real Estate earned $244 million in last year's third quarter.

NEXT BIG THREAT

The commercial real estate sector has been on the decline for more than a year and represents the next great threat to the financial markets, according to recent government reports.

About $1.4 trillion of commercial real estate debt is expected to mature from 2009 through 2013, with 41 percent of that coming due over the next three years. Much of the maturing debt carries a large balloon payment at the end.

Meanwhile, borrowers are facing lenders who have shut their doors to making any more investments in commercial real estate, and are particularly shying away from large loans. On top of that, properties values have sunk and in many cases aren't worth the debt they carry.

The financing available to roll over a lot of commercial debt coming due in the next few years is limited. Much of GE's commercial real estate equity is not worth what the company paid for it, especially assets bought near the market peak in 2006 and 2007.

"They're still not taking impairments on the commercial real estate portfolio and there's a lot of concern about that," said Jack De Gan, chief investment officer at Harbor Advisory Corp, which owns GE shares in client portfolios.

"They acquired that portfolio very late in the rally for commercial real estate," De Gan said. "There's a lot of concern among investors there are significant write-downs yet to come out of that portfolio."

Standard and Poor's noted on Friday that delinquencies, charge-offs and nonperforming assets remain elevated across GE's major businesses, calling real estate credit performance and asset-value deterioration "particularly severe."

RISKS UNDERSTOOD

GE Real Estate's $84 billion in assets represent about 15 percent of total GE Capital assets of $551 billion.

Impairments in the real estate portfolio are "running above plan," GE Chief Financial Officer Keith Sherin told analysts on the company's earnings conference call. But Sherin added: "the risks are understood and manageable."

GE has taken $467 million in real estate equity impairments so far this year, versus an earlier outlook of less than $300 million. Total credit losses and impairments are $1.5 billion year-to-date, GE said.

Sherin said delinquencies were "right in line" with bank real estate portfolios, and noted GE's asset mix and geographic exposure are different than those of banks.

Delinquencies in the commercial real estate debt portfolio -- a warning sign that precedes defaults -- rose to 4.19 percent from 4.03 percent in the prior quarter. The percentage of non-earning assets rose slightly from the second quarter.

The company, which said it evaluates its debt portfolio twice a year, increased its reserves for potential losses on its debt portfolio, but said it was not clear the losses would materialize.

GE has been working to shrink its huge finance arm, which has been hit hard by the credit crunch, and on Friday stressed the strong performance of many of its infrastructure businesses. But GE CEO Jeff Immelt acknowledged the poor performance of GE Real Estate.

"All the other businesses at GE Capital are profitable except for Real Estate, and that is the one we are really going to have to work through," Immelt said.

GE Backs Out Of Funding For Tesla Motors
Originally Posted to AllCarsElectric.com

In a recent interview with Car and Driver magazine, Tesla CEO Elon Musk leaked news that GE would invest funds into Tesla Motors. The news spread quickly. It seemed as though Tesla, who has been in and out of financial trouble constantly, had finally secured a source for some funding. But like other past investors, GE withdrew.

On the day that GE was to wire funds to Tesla, they did not. The funds were never sent, no deal was reached, and Tesla Motors would have to continue their search for money. GE cited a budget restructuring and budget constraints as reasons for withholding the funds, but many feel its simply lack of assurance that Tesla Motors can be successful.

Tesla is searching for funds from the federal government and private investors, but their search has provided almost nothing. Tesla CEO Elon Musk is still the primary investor into the company and nothing at this point seems to suggest that will change. Tesla has only been able to raise about $40 million from other sources and needs substantially more funding to carry on its operations.

Billionaire Musk has the money to support the company, but it would not be profitable for him to provide funding alone.

GE's Immelt Lowers Profit Outlook for Industrial Units

As Posted by: Wall Street Journal

Jeffrey Immelt lowered profit projections for General Electric Co.'s industrial businesses -- including jet engines, power turbines and medical equipment -- but said the units should still make money despite the global economic downturn.

Chairman Jeffrey Immelt said GE expects its revenue to fall up to 5% next year as the company's finance unit shrinks amid the credit crisis.

Mr. Immelt declined to offer a corporate-wide earnings forecast for 2009. But his projection for the industrial units for next year, combined with GE's previously announced plan to shrink its finance unit, suggest overall profit at the Fairfield, Conn., conglomerate will decline in 2009 for a second consecutive year.

GE had to lower its earnings forecast several times this year, contributing to a 52% decline in its shares in 2008.

Mr. Immelt said GE had dropped plans for the moment to sell or spin off its unit that includes its light bulb and appliance divisions. Analysts say the operations had generated little interest from potential buyers.

Mr. Immelt said GE had managed the credit crisis and recession better than competitors and would benefit next year from its services businesses and declining materials costs. "We come through this having learned a lot," he told analysts and investors in his annual outlook speech at NBC's studios in New York. "I'd say the environment is toughest for people of my generation. It's the toughest environment we have ever seen."

Mr. Immelt said GE projects its revenue, estimated at $185 billion this year, will decline as much as 5% next year, as it shrinks the finance unit in response to the credit crisis. But he said GE has no plans to divest the unit, which he said still meshes well with other GE businesses. For example, the unit offers financing to buyers of its industrial products.

Mr. Immelt reiterated GE's plan to maintain its annual dividend of $1.24 a share next year. Some analysts have questioned whether the dividend, which now represents almost a 7% yield on GE shares, would consume almost all the company's cash flow, leaving little money for strategic moves and little margin for error.

GE will take $5 billion out of costs in 2009 through restructuring and headcount reductions, Mr. Immelt said.

GE shares rose 97 cents, or 5.7%, to $17.92 in 4 p.m. New York Stock Exchange trading Tuesday, slightly outpacing the gain in the Dow Jones Industrial Average.

Mr. Immelt said profit in GE's industrial units would rise less than 5% next year. That is less than half of GE's October projection of 10%. The segment also includes NBC Universal.

Deane Dray, a GE analyst, called the new projection "reasonable." Other analysts had been projecting profit in GE's industrial units to decline next year. Mr. Immelt said GE will enter 2009 with roughly $55 billion in backlogged orders for industrial equipment, equal to the backlog in July.

Analysts expect GE to post overall earnings of $1.50 a share in 2009, down from GE's projection of $1.78 to $1.84 for this year and $2.20 in profit last year, according to Thomson Reuters.

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