GE sees ‘tough 2009’ with restructuring plan

General Electric Co. said Tuesday it expects fourth-quarter earnings to be near the low end of its guidance and will take a charge of up to $1.4 billion as it starts to shrink its struggling GE Capital finance arm next year because of the ongoing credit crisis.

The diversified industrial, finance and media conglomerate said it expects 2009 to be a difficult year for GE Capital, which provides a wide range of commercial and consumer loans and has been battered by the global economic downturn. GE laid out plans to reduce the finance unit’s exposure to the turbulent debt markets as it restructures next year.

GE Chief Financial Officer Keith Sherin said the company is also weighing job cuts in both its financial and industrial divisions as part of cost-cutting measures, but did not provide details.

“This will really help us position for a tough 2009,” Mr. Sherin said of the restructuring efforts during a conference call with Wall Street analysts.

Investors cheered what was viewed as a commitment by GE to shore up GE Capital, which has been hammered by turmoil in the credit markets. GE also said it still expects to pay a dividend of $1.24 per share in 2009 despite the sour forecast.

Company shares jumped 13.6 percent Tuesday, closing up $2.11 to $17.61.

The Fairfield, Conn.-based conglomerate’s properties range from aircraft engine manufacturing to the NBC television network.

GE now expects to earn between 50 cents and 52 cents per share in the fourth quarter, at the bottom of its previous guidance of 50 cents to 65 cents per share. The consensus of analysts polled by Thomson Reuters predict 51 cents per share.

The company will also like take a charge of between $1 billion to $1.4 billion in the quarter. GE plans to give greater details on its outlook on Dec. 16.

However, the company did present a grimmer forecast for GE Capital, which has composed about 40 percent of GE’s overall earnings. Next year, that share should drop to around 30 percent, as earnings fall from an expected $9 billion this year to around $5 billion in 2009. GE said it expects GE Capital’s earnings to begin growing again in 2010.

“We will have a smaller yet more focused business model,” said GE Capital CEO Mike Neal.