GE profit falls 46%, hurt by finance unit

In a discouraging report for the American economy, General Electric Co. posted a 46% drop in fourth-quarter earnings Friday and warned of a tough environment this year as it struggles with its ailing finance business.

The results cap a difficult 2008 for one of the world’s largest industrial companies and point to risks ahead.

GE’s businesses touch on most sectors of an economy mired in recession, including medical equipment, real estate and TV stations. And its longtime profit engine, GE Capital, has seen profit sapped as businesses and consumers limit their borrowing or default.

“The environment in total is very tough,” GE Chief Executive Jeffrey Immelt said.

Shares of the Fairfield, Conn.-based company fell $1.45, or 10.8%, to $12.03.

After preferred dividends were paid, GE’s earnings totaled $3.65 billion, or 35 cents a share, for the three months ended Dec. 31, down from $6.7 billion, or 66 cents, a year earlier. Those results included $1.5 billion in charges from a restructuring of GE Capital and increased reserves. But they also included a significant tax boost of $1.38 billion.

That benefit, which some analysts estimate added 17 cents a share to GE’s quarterly earnings, stemmed mostly from higher losses and the restructuring. But this year’s overall tax benefit probably won’t rise to the same levels, the company said.

Quarterly revenue slipped 5% to $46.2 billion.

GE reaffirmed plans to pay its $1.24 dividend and defend its AAA credit rating. But investors worried about how the company would maintain both and keep up growth in its industrial businesses.

GE said it expected earnings growth of zero to 5% this year from its industrial and media divisions, down from 10% in 2008. Industrial orders fell 6% in the fourth quarter, spread across many of GE’s businesses, even those that reported strong quarterly results.

NBC Universal, which includes Universal Studios, the NBC network and Universal theme parks, reported a 6% profit drop to $865 million, driven down in part by less advertising at NBC’s local stations.

Quarterly profit at GE Capital -- its largest segment -- fell to $1.03 billion, less than a third of last year’s total. The unit, which makes loans to consumers and businesses, also fell short of its $9-billion profit goal for the year, topping out at $8.6 billion. In addition, provisions for loan losses will be $1 billion greater than originally forecast.

For all of 2008, GE earned $17.3 billion, or $1.72 a share, down 22% from the previous year. Revenue grew 6% during 2008 to $183 billion.