Tag Archives: GE

General Motors And General Electric Were Both Victimized By The Same Ponzi Scheme, And They Are Both Telling Us The U.S. Economy Is In HUGE Trouble, by Michael Snyder

Posted on November 28, 2018 | Leave a comment

Are GM’s and GE’s troubles unique to those companies, or are there indicating trouble for the US economy? From Michael Snyder at theeconomiccollapseblog.com:

America’s twin economic “generals” are both in very deep trouble.  General Electric was founded in 1892, and it was once one of the most powerful corporations on the entire planet.  But now it is drowning in so much debt that it may be forced into bankruptcy.  General Motors was founded in 1908, and at one time it was the largest automaker that the world had ever seen.  But now it is closing a bunch of factories and laying off approximately 14,000 workers as it anticipates disappointing sales and a slowing economy.  If the U.S. economy really was “booming”, both of these companies would probably be thriving.  But as you will see below, both of them have been victimized by the exact same Ponzi scheme, and both firms are sending us very clear signals that the U.S. economy is heading for troubled waters.

Whenever you hear the word “restructuring”, that is always a sign that things are not going well for a company.

And it turns out that GM’s “restructuring” is actually going to cost the firm 3.8 billion dollars…

General Motors said Monday it plans to effectively halt production at a number of plants in the U.S. and Canada next year and cut more than 14,000 jobs in a massive restructuring that will cost up to $3.8 billion.

Of course GM doesn’t have 3.8 billion dollars just lying around, and so they are actually going to have to borrow money in order to close these plants and lay off these workers.

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Corporate Share Buybacks Looking Dumber By The Day, by John Rubino

Posted on November 26, 2018 | Leave a comment

Somehow this is legal: stock-option laden managements authorize their corporations to buy back shares, often with borrowed money, thus theoretically supporting the share price and enriching management. It doesn’t always work out, especially when the stock market goes down. From John Rubino at dollarcollapse.com:

A recent MarketWatch article notes that:

GE was one of Wall Street’s major share buyback operators between 2015 and 2017; it repurchased $40 billion of shares at prices between $20 and $32. The share price is now $8.60, so the company has liquidated between $23 billion and $29 billion of its shareholders’ money on this utterly futile activity alone. Since the highest net income recorded by the company during those years was $8.8 billion in 2016, with 2015 and 2017 recording a loss, it has managed to lose more on its share repurchases during those three years than it made in operations, by a substantial margin.

Even more important, GE has now left itself with minus $48 billion in tangible net worth at Sept. 30, with actual genuine tangible debt of close to $100 billion. As the new CEO Larry Culp told CNBC last Monday: “We have no higher priority right now than bringing those leverage levels down.” The following day, GE announced the sale of 15% of its oil services arm Baker Hughes, for a round $4 billion.

Of course, since that sale values Baker Hughes at $26 billion, and GE paid $32 billion for 62% of Baker Hughes as recently as last year, which looks to me like a valuation for the whole company of $52 billion, GE shareholders appears to have lost half the value of their investment in Baker Hughes in about 18 months.

But GE is just one of several hundred big companies with CEOs who now have to justify a massive, in some cases catastrophic waste of shareholder cash.

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Where the Heck are Share Buybacks in This Rotten Market? by Wolf Richter

Posted on November 2, 2018 | Leave a comment

The old share-buyback black magic doesn’t appear to be working anymore. From Wolf Richter at wolfstreet.com:

The myth of the “blackout period.” And the price of “unlocking value.”

Share buybacks weren’t happening today. Shares fell, after three days of rallying that followed the worst October since 2008, which had wiped out $4 trillion in overvalued market capitalization in the US, Europe, and Asia.

Shares fell today in part because Apple [AAPL], the giant in the indices, gave iffy guidance for the holidays Thursday evening; and with product sales not going anywhere, and only price increases boosting revenues, it said it would no longer disclose unit sales. This combo worked like a charm, and shares dropped 6.6%.

So where are the corporate share buybacks when you need them? This is when companies buy back their own shares in order to prop up their price and thereby the overall market. Where is this panacea that was considered securities fraud until 1982?

Throughout October, Wall Street gurus promised that shares would rise as soon as companies emerged from their “blackout” period that prevents them from buying back their shares.

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GE just signaled the next crisis and nobody’s paying attention, Simon Black

Posted on February 1, 2018 | 1 comment

Simon Black has two good articles tonight. From Black at sovereignman.com:

Earlier this month, General Electric took a $6.2 billion charge to its insurance unit for the fourth quarter. And the company said it will set aside another $15 billion over seven years to bolster reserves at GE Capital.

The charge had to do with long-term care policies (to pay for nursing homes and other late-life care) GE holds on its books.

So, one of the oldest and most highly-regarded companies in America just made a small, $21 billion miscalculation. Oops.

Keep in mind, GE’s entire market cap is only $140 billion.

The insurance charge, along with costs tied to the US tax plan, led GE to a $9.64 billion loss in the fourth quarter.

Then last week, GE announced the Securities and Exchange Commission (SEC) was investigating the company’s accounting practices (specifically how the company books revenue from long-term service contracts on things like power-plant repairs and jet-engine maintenance).

But this isn’t GE’s first run in with the SEC…

The company’s accounting practices have long been considered a “black box.” The New York Times even published a story in 2009 comparing the company to Enron – the energy giant brought down by fraudulent accounting.

And is all started with GE’s legendary former CEO Jack Welch.

Welch would regularly beat Wall Street’s earnings estimates by a penny or two. And he was named manager of the century by Fortune Magazine for his ability to pump GE’s stock.

And while Welch is lauded for his “six sigma” management, it seems his real talent was using GE’s many divisions to move assets around and goose earnings to hit short-term numbers.

The creative accounting caught up with GE in 2009, when the company paid $50 million to settle SEC allegations it had used improper accounting methods to boost numbers in 2002 and 2003.

To continue reading: GE just signaled the next crisis and nobody’s paying attention

 

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The U.S. Economy is a Perverted, Neo-Feudal, Rent-Seeking Abomination, by Michael Krieger

Posted on June 23, 2017 | Leave a comment

From GE funding share buybacks (which supports the price of executive stock options) instead of its underfunded pension, to trucking companies that indenture their drivers, it’s a nasty world out there, and it’s getting nastier. From Michael Krieger at libertyblitzkrieg.com:

The banker bailouts of the 2008/09 period changed my life forever. I was working on Wall Street at the time, and the way in which the government rallied around the financial institutions that torched the world and left its victims in the dust threw my entire delusional worldview into disarray. Prior to that, I had bought into the absurd assumption that I was financially successful at a young age primarily because I was hard-working and talented. The ensuing bailouts and the government’s emphasis on obsessively rescuing some of the most degenerate people in our society made me realize once and for all how completely rigged and sleazy the U.S. economy really is. As you might expect, it only got worse under Obama’s oligarch-coddling policies and will surely continue to deteriorate under Trump (Goldman Sachs is not your friend).

Ever since I left my cushy financial services job to do the challenging and often draining work of chronicling our ongoing crime scene, I’ve spent the vast majority of my free time trying to further educate myself on exactly how this system works. What I’ve discovered over and over again is that it is far more abusive than even I imagined.

Today’s post highlights two important articles that came to my attention over the past couple of days. Both are extremely disturbing, and both should be seen as completely unacceptable in a remotely ethical civilization (which we are not).

First, here’s a short excerpt from a recent Bloomberg article highlighting GE’s pension shortfall, and how it’s gotten worse as executives focused on share-buybacks as opposed to funding the pension.

It’s a problem that Jeffrey Immelt largely ignored as he tried to appease General Electric Co.’s most vocal shareholders.

But it might end up being one of the costliest for John Flannery, GE’s newly anointed CEO, to fix.

At $31 billion, GE’s pension shortfall is the biggest among S&P 500 companies and 50 percent greater than any other corporation in the U.S. It’s a deficit that has swelled in recent years as Immelt spent more than $45 billion on share buybacks to win over Wall Street and pacify activists like Nelson Peltz.

To continue reading: The U.S. Economy is a Perverted, Neo-Feudal, Rent-Seeking Abomination

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He Said That? 6/7/15

Posted on June 7, 2015 | 2 comments

Connecticut’s Democratic governor and Democratic-dominated legislature just increased both corporate and individual taxes, after promising not to during their 2014 election campaigns. General Electric is headquartered in Connecticut. The company complained that the state is “retroactively raising taxes again,” which “makes businesses, including our own, and citizens seriously consider whether it makes any sense to continue to be located in this state.” That’s a straightforward declaration that even obtuse politicians can understand. Jeffrey Immelt, the CEO of GE and not one of SLL’s most admired corporate leaders (see “Peak Financial Engineering,” SLL, 4/4/15), had his say. He told an assembly of the company’s Connecticut employees that he has “assembled an exploratory team to look into the company’s options to relocate corporate HQ to another state with a more pro-business environment.” Again, a straightforward declaration—so far, so good. Then he ruined it.

I believe we should pay our fair share and that all of us should give back to our communities. We can compare Connecticut with other states where small and large businesses have a better environment to thrive and compete.

The Wall Street Journal, “Connecticut Tax Boomerang,” 6/6-6/7/15

Ayn Rand voiced frustration at executives and entrepreneurs who defended capitalism by the moral standards of their opponents. Just being in business, providing jobs, improving their communities, and paying taxes, Connecticut’s productive, profitable businesses do far more for Connecticut than its politicians, Maybe Immelt thinks they’re only bromides, but what is a “fair share,” and why should productive citizens and businesses have to “give back”? It is they who have been “taken from,” and by paying homage to the hypocritical standards of capitalism’s opponents, he gives them all the ammunition they need. After all, who’s to say what is a “fair share” and how much should be given back? Capitalism allows individuals to produce, sell their services, contract, and voluntarily exchange with other individuals. It is the economics of free minds, free markets, and free people, and that is its moral justification. It is harmed, not helped, when it’s putative practitioners do not defend it in terms of that freedom which is its foundation.

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