GE to Take Pretax Charge to Aid Restructuring

General Electric Co. said Wednesday that it will take a pretax charge of $2 billion in the fourth quarter to restructure its industrial businesses, in a move to lower costs and improve its competitiveness.

GE said last month that it planned to reorganize the businesses, using money received in a swap of Lockheed Martin Corp. preferred stock. GE will book an after-tax gain of $1.4 billion on the swap, spokesman Bruce Bunch said, offsetting the charge’s effect on fourth-quarter earnings.

Fairfield, Conn.-based GE isn’t restructuring because its businesses are in trouble, analysts said. Instead, GE is trying to become more efficient as global economic conditions make it harder to raise prices and boost profit margins, they said.

“The idea is to enhance cost competitiveness,” said Prudential Securities analyst Nicholas Heymann. “This is all about deflation.”

GE’s stock fell 88 cents to close at $73.75 on the New York Stock Exchange. Its market value is $241.4 billion, the highest of any U.S. company.

GE industrial units likely to be targeted in the restructuring are those making power systems, plastics, home appliances, medical systems, locomotives and motors, analysts said.

GE’s appliance business, for example, is in an industry in which product prices fell 3% to 4% this year, Heymann said. GE doesn’t want to be caught flat-footed in a world where prices are falling or rising only slightly, he said.

“If you aren’t ready for that, you are going to be squeezed,” said Heymann, who rates GE stock a “buy.”

GE will begin releasing details of the restructuring plan later this month, Bunch said.

GE, which made a record $7.3 billion last year, is immersed in a cost-reduction program called Six Sigma that analysts estimate will add $5 billion to profit in the next few years and generate per-share earnings growth of 15% annually. Six Sigma rewards managers and workers for flawless products while boosting profit.

GE will earn 71 cents a share in the fourth quarter, based on the average estimate of analysts.