The General Electric Company Has Potential Cash Flow Problems If the Stock Market Turns Bear

In 2018, Fortune Magazine ranked General Electric number 18 in their 500 largest corporate rundown. In 2011, the company was the 14th most profitable company on the Fortune 500 list. And in 2012, General Electric made it to the Forbes Global 2000 list, and GE was the fourth-largest company in the world. Irving Langmuir won the Nobel Prize while he was a GE employee back in 1932. And Ivar Giaever, another GE employee won a Nobel Prize in 1973.

Some investors say “where’s all the beef?” They say with credentials like that General Electric should be flying high with lots of cash flow and a stable of profitable assets. Investors know General Electric has a major impact on America’s economic growth. At last count, General Electric dabbles in the aviation, manufacturing, healthcare, power, venture capital, transportation, lighting, and the finance sectors of the economy. General Electric stock sits at $7 a share now, and that sort of value decline signals major internal issues.

Poor management decisions and being in too many sectors of the economy at one time without reading the corporate meltdown tea leaves the right way created a giant implosion. Shady accounting procedures and a $15 billion shortfall on long-term-policies attracted the attention of the Securities and Exchange Commission. That investigation and the cash flow issue, as well as complaints about the management’s style, it’s the business decision-making process, and management’s lack of respect for fellow workers set off a shareholder rebellion.

But GE still has about $15 billion in the bank and a $40 billion line of credit, so GE isn’t headed for bankruptcy. But according to a Motley Fool article, Deutsche Bank thinks General Electric could get trapped by the upcoming economic slowdown. In fact, General Electric could get into a high-powered cash burning period. The bank thinks GE could burn through as much as $3 billion per year if a recession hits. That’s why the bank’s stock took another six percent beating, recently.

Insurance risks put GE in this shaky position. When GE Capital made a deal with Genworth IPO to take the long-term care piece of their insurance business, Genworth left GE Capital with the long-term-care contracts they knew would be profit breakers. But new president Larry Culp has a plan. The company wants to unload more businesses. So it’s safe to say GE is a work in progress.