Can GE Bring Good Things to Its Business Once Again?

Wharton University
It would have been considered a turbulent stretch for any company, but the recent fall of General Electric has struck many as especially unsettling. The venerable multinational firm is experiencing a cash crunch, has seen the evaporation of more than $100 billion in market value over the past year, and recently cut its dividend for only the second time since the Great Depression. “Downright staggering,” is how one analyst quoted in a December Barron’s article described GE’s stock decline of more than 40% in a year when its Dow Jones brethren added 25% in value.

The article’s headline asked the question on the mind of many: “General Electric: Where’s the bottom?”

Poor timing has something to do with GE’s troubles, says Wharton emeritus management professor Marshall W. Meyer, noting its move into energy as the sector has slumped. But GE’s woes also beg a larger question, he says. “GE is the last of the conglomerates, and there’s a large literature that frowns on unrelated diversification,” he says. “There was a while when we applauded the conglomerates, that goes back to the 1970s. But they’ve almost all dropped away and — surprise — the last one runs into trouble. And so, what business are you in?”

It’s a question the company, with new leadership now in place, is asking itself. John L. Flannery took over as CEO a few months ago with the tall order of restoring stability and growth following the controversial leadership of Jeffrey Immelt, who defended his more than decade-and-half tenure in a Harvard Business Review essay as “one of progress versus perfection. The outcomes of my decisions will play out over decades, but we never feared taking big steps to create long-term value.”

“It’s a fascinating case,” says Wharton management professor John R. Kimberly, “with lots of questions about [Immelt’s] approach to transformation, his beliefs about the importance of personal fortitude, and, ultimately, about the viability of the hugely complicated organizational entity that GE has become in a world that is changing so fast. The notion that GE can ‘pivot,’ for example, seems a stretch at best.”

So jarring have the events of the past few years been that many wonder whether General Electric’s best days are behind it. Says Meyer: “At some point, there is a question of whether the breakup value is larger than the share price, and someone comes along and separates out the pieces and sells them off or keeps them. There are a lot of assets in the company — the jet-engine business, the power business, the medical business. These are the core businesses, and they basically look pretty good in the long run, so there is value there. But how they grow the organization to realize the value is another issue entirely. Here’s my worry. The focus on bottom-line metrics, on short-term value for the shareholder, can’t be good for long-term health for the business. It’s an old story.”

Wharton emeritus professor George Day, who has consulted with GE in the past, is “as shocked as anyone to see the collapse of the stock price recently,” but beyond the short-term problems, which he says are serious, there is cause to be bullish. “I think the more interesting story is about their prospects for the future. [Because it is] such a complex and diversified firm, most people struggle to really understand GE. There’s always been a diversification discount to their share price they’ve long wrestled with. My sense is that it’s going to be a slow turnaround. They’ve probably hit close to the bottom now, and I would argue that there is significant upside from what they have already put in place.”

Day adds: “It goes back to the question that people have struggled with as they try to understand GE, which is: what is the glue that keeps the pieces together? How much added value is there to combining rather than separating the pieces?”

GE is now looking at that question. Just in the past few days, breaking up one of America’s oldest and most widely admired conglomerates has emerged as a distinct possibility as Flannery himself has signaled it as an option.

“No one likes to look at their stock price go down and say, ‘I feel good about that.’ It goes without saying,” said Flannery on CNBC in November, just after taking over GE. “But there’s a lot of pent-up energy and desire for redemption and improvement, so my job is to channel that as a leader. And obviously, people look at how I feel about the prospects ahead, and I recognize the heavy lift, but I feel great about the prospects.”

“The focus on bottom-line metrics, on short-term value for the shareholder, can’t be good for long-term health for the business. It’s an old story.”

On leadership, Kimberly says it is easy to catalogue the negatives — a “stock price way down, dividend slashed by 50%, the usual press frenzy when a visible CEO exits under duress, etc.” But he points out that it is also important to remember the macro forces Immelt encountered, and how they differed from those encountered by his superstar predecessor, Jack Welch.

“I’ve always believed that while leaders certainly make a difference – and frequently a substantial difference – in how and why firms performs as they do, there is a tendency to over-attribute outcomes to their impact,” says Kimberly. “Given that it is much easier – and more newsworthy – to focus on what leaders say and how they manage their public face than to ask the larger questions; and given that answers to the larger questions are often not immediately available or only become evident long after the fact, this is not surprising.

“None of this is to suggest that GE under Immelt was a high performer and that the negative press that surrounded the announcement of his exit from the CEO position was undeserved,” Kimberly continues. “But it is to suggest that both his critics and his supporters are partly right. It is a fact – assuming that facts still matter – that GE’s financial performance on Immelt’s watch was disappointing, to say the least.

And it is a fact that GE has invested heavily in attempting to transform itself into an enterprise designed to thrive in the 21st century, with all that that implies. Will the transformative bets pay off? How will John Flannery reconfigure what Immelt started? And then, ultimately, how will his legacy be viewed? That will depend largely on who you ask and when, because the payoffs from transformation won’t be visible any time soon.”

Could the right leadership have averted some of the missteps of recent years? There is no shortage of rueful decisions and deferred maintenance – matters that have enormous consequences for GE’s nearly 300,000 employees, hundreds of thousands of retirees and millions of shareholders. GE began to fall behind on its pension obligation after the recession, and by the end of 2016 had run up a shortfall of $31.1 billion — the biggest shortfall among S&P companies, according to a Bloomberg analysis. To meet its pension obligation in 2018, the company plans to take out $6 billion in debt.

GE’s decision in 2015 to buy the power business of Alstom, maker of coal-fueled turbines for power plants, is now seen as badly timed and, with a $9.5 billion price tag, a conspicuous case of overpaying. “If we could go back in the time machine today, we would pay a substantially lower price than we did,” Flannery told CNBC.

Day says the question of the company’s lack of focus became a pressing issue when they had lines as disparate as NBC and major appliances, “which did not fit well at all. And then GE Capital kind of swallowed the company.” After a review of GE Capital, the company recently decided to take a $6.2 billion charge on the finance unit.

Flannery plans to sell off, over the next year or two, about $20 billion in assets, including GE’s lighting division. That act, more than any other, telegraphs a willingness to forfeit pride of legacy for new frontiers. It means the company that traces its roots to Thomas Edison would no longer sell light bulbs.

Evolving the Culture

Once widely admired for its ability to “bring good ideas to life,” General Electric under Immelt started calling itself “a 125-year-old start-up … a digital industrial company that’s defining the future of the Internet of Things.” Some believe that the new corporate aphorism is becoming more than just an expression of aspiration. But change requires a cultural shift, and Meyer says the sale of GE Appliances to Chinese manufacturer Haier in 2016 (for $5.6 billion) has been instructive about what is needed.
It would have been considered a turbulent stretch for any company, but the recent fall of General Electric has struck many as especially unsettling. The venerable multinational firm is experiencing a cash crunch, has seen the evaporation of more than $100 billion in market value over the past year, and recently cut its dividend for only the second time since the Great Depression. “Downright staggering,” is how one analyst quoted in a December Barron’s article described GE’s stock decline of more than 40% in a year when its Dow Jones brethren added 25% in value.

The article’s headline asked the question on the mind of many: “General Electric: Where’s the bottom?”

Poor timing has something to do with GE’s troubles, says Wharton emeritus management professor Marshall W. Meyer, noting its move into energy as the sector has slumped. But GE’s woes also beg a larger question, he says. “GE is the last of the conglomerates, and there’s a large literature that frowns on unrelated diversification,” he says. “There was a while when we applauded the conglomerates, that goes back to the 1970s. But they’ve almost all dropped away and — surprise — the last one runs into trouble. And so, what business are you in?”

It’s a question the company, with new leadership now in place, is asking itself. John L. Flannery took over as CEO a few months ago with the tall order of restoring stability and growth following the controversial leadership of Jeffrey Immelt, who defended his more than decade-and-half tenure in a Harvard Business Review essay as “one of progress versus perfection. The outcomes of my decisions will play out over decades, but we never feared taking big steps to create long-term value.”

“It’s a fascinating case,” says Wharton management professor John R. Kimberly, “with lots of questions about [Immelt’s] approach to transformation, his beliefs about the importance of personal fortitude, and, ultimately, about the viability of the hugely complicated organizational entity that GE has become in a world that is changing so fast. The notion that GE can ‘pivot,’ for example, seems a stretch at best.”

“The notion that GE can ‘pivot’ seems a stretch at best.” –John R. Kimberly

So jarring have the events of the past few years been that many wonder whether General Electric’s best days are behind it. Says Meyer: “At some point, there is a question of whether the breakup value is larger than the share price, and someone comes along and separates out the pieces and sells them off or keeps them. There are a lot of assets in the company — the jet-engine business, the power business, the medical business. These are the core businesses, and they basically look pretty good in the long run, so there is value there. But how they grow the organization to realize the value is another issue entirely. Here’s my worry. The focus on bottom-line metrics, on short-term value for the shareholder, can’t be good for long-term health for the business. It’s an old story.”

Wharton emeritus professor George Day, who has consulted with GE in the past, is “as shocked as anyone to see the collapse of the stock price recently,” but beyond the short-term problems, which he says are serious, there is cause to be bullish. “I think the more interesting story is about their prospects for the future. [Because it is] such a complex and diversified firm, most people struggle to really understand GE. There’s always been a diversification discount to their share price they’ve long wrestled with. My sense is that it’s going to be a slow turnaround. They’ve probably hit close to the bottom now, and I would argue that there is significant upside from what they have already put in place.”

Day adds: “It goes back to the question that people have struggled with as they try to understand GE, which is: what is the glue that keeps the pieces together? How much added value is there to combining rather than separating the pieces?”

GE is now looking at that question. Just in the past few days, breaking up one of America’s oldest and most widely admired conglomerates has emerged as a distinct possibility as Flannery himself has signaled it as an option.

Leadership and ‘the Heavy Lift’

“No one likes to look at their stock price go down and say, ‘I feel good about that.’ It goes without saying,” said Flannery on CNBC in November, just after taking over GE. “But there’s a lot of pent-up energy and desire for redemption and improvement, so my job is to channel that as a leader. And obviously, people look at how I feel about the prospects ahead, and I recognize the heavy lift, but I feel great about the prospects.”

“The focus on bottom-line metrics, on short-term value for the shareholder, can’t be good for long-term health for the business. It’s an old story.” –Marshall W. Meyer

On leadership, Kimberly says it is easy to catalogue the negatives — a “stock price way down, dividend slashed by 50%, the usual press frenzy when a visible CEO exits under duress, etc.” But he points out that it is also important to remember the macro forces Immelt encountered, and how they differed from those encountered by his superstar predecessor, Jack Welch.

“I’ve always believed that while leaders certainly make a difference – and frequently a substantial difference – in how and why firms performs as they do, there is a tendency to over-attribute outcomes to their impact,” says Kimberly. “Given that it is much easier – and more newsworthy – to focus on what leaders say and how they manage their public face than to ask the larger questions; and given that answers to the larger questions are often not immediately available or only become evident long after the fact, this is not surprising.

“None of this is to suggest that GE under Immelt was a high performer and that the negative press that surrounded the announcement of his exit from the CEO position was undeserved,” Kimberly continues. “But it is to suggest that both his critics and his supporters are partly right. It is a fact – assuming that facts still matter – that GE’s financial performance on Immelt’s watch was disappointing, to say the least.

And it is a fact that GE has invested heavily in attempting to transform itself into an enterprise designed to thrive in the 21st century, with all that that implies. Will the transformative bets pay off? How will John Flannery reconfigure what Immelt started? And then, ultimately, how will his legacy be viewed? That will depend largely on who you ask and when, because the payoffs from transformation won’t be visible any time soon.”

“What is the glue that keeps the pieces together? How much added value is there to combining rather than separating the pieces?” –George Day

Could the right leadership have averted some of the missteps of recent years? There is no shortage of rueful decisions and deferred maintenance – matters that have enormous consequences for GE’s nearly 300,000 employees, hundreds of thousands of retirees and millions of shareholders. GE began to fall behind on its pension obligation after the recession, and by the end of 2016 had run up a shortfall of $31.1 billion — the biggest shortfall among S&P companies, according to a Bloomberg analysis. To meet its pension obligation in 2018, the company plans to take out $6 billion in debt.

GE’s decision in 2015 to buy the power business of Alstom, maker of coal-fueled turbines for power plants, is now seen as badly timed and, with a $9.5 billion price tag, a conspicuous case of overpaying. “If we could go back in the time machine today, we would pay a substantially lower price than we did,” Flannery told CNBC.

Day says the question of the company’s lack of focus became a pressing issue when they had lines as disparate as NBC and major appliances, “which did not fit well at all. And then GE Capital kind of swallowed the company.” After a review of GE Capital, the company recently decided to take a $6.2 billion charge on the finance unit.

Flannery plans to sell off, over the next year or two, about $20 billion in assets, including GE’s lighting division. That act, more than any other, telegraphs a willingness to forfeit pride of legacy for new frontiers. It means the company that traces its roots to Thomas Edison would no longer sell light bulbs.

Evolving the Culture

Once widely admired for its ability to “bring good ideas to life,” General Electric under Immelt started calling itself “a 125-year-old start-up … a digital industrial company that’s defining the future of the Internet of Things.” Some believe that the new corporate aphorism is becoming more than just an expression of aspiration. But change requires a cultural shift, and Meyer says the sale of GE Appliances to Chinese manufacturer Haier in 2016 (for $5.6 billion) has been instructive about what is needed.

“[In] the era of the Internet you move quickly or get left behind, and there is a question of whether the GE culture — which was so fabulous two decades ago — fits the new era.” –Marshall W. Meyer

“GE culture is known world-wide as the model of methodical operations as well as methodical personnel management, but Haier buys it and their management system is very different,” says Meyer, who has studied Haier for nearly two decades. “They cobbled together a Chinese term, rendanheyi, which means either people- or customer-integration, the basic idea being that anyone who makes anything has to have a direct line of sight to the customer. There are two mantras – one is zero distance to the customer, and the other is compensation as a function of the value created for the user – Haier calls it pay by user. Now, GE is very methodical and process-oriented, while the new model is almost the opposite, because it demands speed, it demands agility, it’s comfortable with experimentation, with entrepreneurial ventures.

“From the Haier perspective, in the era of the Internet you move quickly or get left behind, and there is a question of whether the GE culture — which was so fabulous two decades ago — fits the new era,” Meyer notes. “I very much hope it can.”

Flannery says the new era at GE will focus on three lines of business: energy, aviation and medical technology. In fact, there is quite a bit of connective tissue GE brings to these disparate businesses, says Day. “The first one is a long-term willingness to invest in talent development, particularly executive talent development. They’ve always had a pretty deep bench. The second one is a strong problem-solving culture. Third, they have rigorous financial controls supporting a strong focus on earnings. The fourth one is to me the big long-run play, which is for at least five years they have focused on using digital technologies to integrate and extend the complex systems in their core businesses. As a glue it means that they can take everything from big data and data analytics, to the Internet of Things, to AI and blockchains, and deploy them for complex business solutions, which I think is an exciting long-run opportunity.”

GE, for instance, has recently upped its ownership in Arcam AB, a Swedish 3D printing company, from 77% to 95%. The move, combined with the acquisition of another European 3D printing firm, will support a number of GE businesses, including its jet-engine manufacturing business. A decade’s worth of research and development appears to be on the verge of paying off for GE Aviation. A new GE Advanced Turboprop (ATP) engine has been produced using 35% 3D-printed and related techniques, reducing 855 components to just 12, making it lighter and more fuel-efficient. The engine completed its first-run testing in Prague in December.

Day see the potential for GE to become a leader in digitally integrated systems – scenarios in which “they can put together hardware with software and build deep relationships with customers and provide the financing, and then offer risk-sharing. Customers love it when you can figure out a way to share some of their operating risks,” he says.

“Think of power-by-the-hour for aircraft engines – they shifted from a purchase-lease to a pay-for-what-you-use business model. I think you’ll see that in some of their other businesses. Why couldn’t you, for example, in medical imaging systems have a model where customers pay only for the images that they take? You’ve got these digital capabilities on hand, and they’ve invested a lot in creating these capabilities in Silicon Valley. It is getting harder to find the scarce talent you need to do a digital deployment, because there are not that many people good with AI or big data analytics. There’s a big talent war going on out there. But I think in large systems, GE stands a good chance of winning the talent war. As immigration shuts its doors from talented people outside, GE can go to a number of facilities in Canada, in Europe and Asia. They have a global advantage.”

Day continues: “I can’t think of another company as well positioned to participate in the big Internet of Things, to create digitally integrated solutions across as many sectors and the ability to share their learnings. While they are pretty focused on quarterly earnings, they also famously want to play in the long-run – and have to, given the scale of investments they have to make, which raises the barrier of entry for others.”

While GE’s latest quarterly earnings report didn’t surprise analysts — it had a $9.8 billion loss in the last quarter — the company also disclosed that it is facing an S.E.C. accounting inquiry into its insurance business. General Electric faces “very difficult short-term problems,” Day concedes. But those eventually will be fixed. “Over the long term, many of the pieces appear to be in place.”

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A futuristic Hyperloop system may be coming to 3 unlikely cities

Business Insider

An upcoming study will determine the feasibility of a Hyperloop system in Missouri that would connect St. Louis, Columbia, and Kansas City.

The study would be conducted by a combination of public and private organizations, including Virgin Hyperloop One.

Hyperloop is a high-speed transportation system in the early stages of development that would allow passengers to travel in pods through tubes at speeds exceeding 500 mph.

Most proposals for the high-speed Hyperloop transportation system have focused on big cities like Los Angeles, Chicago, and Washington, DC. But an upcoming study will determine the feasibility of a Hyperloop system in Missouri that would connect St. Louis, Columbia, and Kansas City.

The study will examine the technical alignment and potential economic benefits of the Hyperloop system, and will be conducted by a combination of public and private organizations, including Black & Veatch, the University of Missouri System, and Virgin Hyperloop One. The proposed 240-mile route could allow passengers to travel between Kansas City and St. Louis in less than 30 minutes.

Virgin Group invested in Hyperloop One in October 2017. The startup has successfully tested its Hyperloop system twice on a 500-meter track in Nevada. It reached a top speed of 192 mph during the tests.

Hyperloop is a high-speed transportation system that was first proposed by Elon Musk in a 2013 white paper. While the system is still in the early stages of development, it could one day allow passengers to travel in pods through tubes at speeds exceeding 500 mph.

Musk’s Boring Company is attempting to create the tunnel infrastructure that could make Hyperloop possible, but it has faced resistance from local governments. Two of Musk’s other companies, SpaceX and Tesla, tested a Hyperloop pod in 2015 that reached a top speed of 220 mph, which is the fasted recorded time to date.

Before locomotives, GE built a town

Burlington County Times

When Pennsylvania General Electric Co. built the first buildings of its mammoth factory in Lawrence Park in 1910, there was no Lawrence Park.

Attorney James Sherwin, on the company’s behalf, had bought 800 acres of farmland east of Erie in what then was Millcreek Township. General Electric would need land not only for its factory but for a town to house its workers.

The only transportation from Erie was seasonal trolley service from Perry Square to Grove House Park, an amusement park fronting Lake Erie at Four Mile Creek. The people who worked at the plant would have to live close by.

Sherwin and GE architect Clement Kirby took pains on the town design, traveling to England to see “garden cities” and later enlisting the aid of John Nolen, now recognized as the nation’s first city planner.

Nolen’s work in Lawrence Park is the keystone of a Lawrence Park Historical Society application for National Register of Historic Places designation for the town that GE built.

The Pennsylvania Historical and Museum Commission will consider the application Feb. 6. If approved, it moves on to the National Parks Service for final approval.

“Our history is unique,” said Marjorie McLean, a historical society director and author of “Lawrence Park” in Arcadia Publishing’s “Images of America” series. “It’s a matter of pride for us, I think, to have it recognized.”

Nolen was at work in Erie at about the same time that Lawrence Park was designed, on the city’s “Greater Erie” plan. The Philadelphia native is famed for residential neighborhoods laid out with sidewalks, streetlights, parks, trees and open land for churches and schools.

A large lot set aside by Nolen for a school in Lawrence Park by 1913 was the site of the brick Priestley Avenue School.

Congregations were offered donations to build churches. One of the early takers was St. Mary’s Episcopal Parish, which built a combined parish hall and church on Silliman Avenue in 1914.

The original town was named for War of 1812 naval hero James Lawrence and laid out along streets named for inventors: Rankine, Silliman, Smithson, Field and Bell, according to McLean’s history.

There were 325 original home lots, most measuring 40 by 125 feet, according to a broadside in the historical society collection advertising “the opening sale of Lawrence Park” the week beginning May 29, 1911.

Lots were laid out to include front yards at least 25 feet deep from street to porches and large back yards for gardens.

Sale price was $300 to $1,500.

Commercial lots along Iroquois Avenue and Main Street sold for $800 to $1,500.

“Property must be seen to be appreciated,” according to advertisements by Erie land agent W.S. Pole in the Erie Daily Times preceding the sale. Photographs showed dirt fields labeled “Rankine Street” and “Main Street leading to east main entrance General Electric Works.”

In two days, 10 percent of the lots sold, and, better, “more than 30 percent of the purchasers have obligated themselves to commence construction of homes within the next 30 days,” the Times reported May 31, 1911.

Buyers committing to build within six months saved 20 percent on their lots.

Homes were served by electricity, water, sewer and gas.

Lawrence Park was expanded in 1917 to accommodate a growing number of employees as GE increased production during World War I. Nolen designed the new neighborhood, including the town’s signature row houses.

His role in Lawrence Park’s design wasn’t realized until recently when consultants hired by the historical society to write the application for National Register designation recognized Nolen’s name. After his work in Lawrence Park, Nolen went on to design communities across the country. His papers, including references to his work in Lawrence Park, are preserved in the Cornell University library.

“We had one or two letters that mentioned this guy, but the name didn’t mean anything to us,” Lawrence Park Historical Society President Anna Mae Van Dyne said. “The consultants got excited because Nolen was involved. In all these years doing research, we didn’t realize who he was or that he was involved in all of this.”

Nolen’s “industrial village” design embraced earlier “garden city” concepts, added green space between factory and town and included homes for factory managers next door to employees.

GE in later years built a community center on East Lake Road. GE Athletic Association provided leisure-time sports and activities.

In recent years, as GE Transportation pulled work and jobs from the local plant, “The Park,” as Nancy Wassell and other Lawrence Park natives call the town, has necessarily become less reliant on the behemoth next door.

“Just on the street where I live, people work at a lot of different places now,” McLean said, and fewer and fewer at “the GE,” as Lawrence Park residents refer to the plant. “But we still feel that sense of community.”

The hype around Hyperloop

BBC News

Does the technology behind the much-vaunted new transport system Hyperloop really stand up to scrutiny?

Hyperloop’s technology in question
Anything that Elon Musk says is taken very seriously given his track record in defying sceptics who thought he would never build a sporty electric car or a reusable rocket. So when he floated the idea of the Hyperloop, a high speed transport system in a vacuum tube, various companies leapt into action.

In Davos this week, a company called Hyperloop Transportation Technologies promised that it would be announcing its first commercial track this year. But the project which seems to have got furthest is Virgin Hyperloop One, which has built a 500m test track in Nevada.

On Tech Tent we hear from Virgin Hyperloop’s Anita Sengupta who tells us that everything is on track for the first commercial operation in 2021 – and from Gareth Dennis, a railway engineer.

“The fundamental laws of physics are the same for Hyperloop as for high-speed rail,” says Mr Dennis, a design engineer working for the Arcadis consultancy.

He explains that the faster a train goes, the shallower any curve in the track has to be.

“For high-speed rail, the curves have to be 10km long, and that’s only at 200mph to 250mph. Hyperloop’s going to be hurtling along at 700mph so the track will almost have to be dead straight.”

He believes that means that in countries with plenty of built-up areas this will mean putting the Hyperloop in tunnels, a prohibitively expensive business. He also has concerns about the process of switching pods between different tunnels as they approach a station.

But his biggest doubt is about the capacity of any Hyperloop line in comparison with something like the UK’s HS2 high-speed rail project: “They are going to have to have as many as 400 pods departing every hour, which requires a huge amount of infrastructure.

“I just don’t think that is going to be economically or environmentally viable in the near future.”

Hyperloop’s backers say the engineering challenges are different from those on high-speed rail and cannot be compared.

They believe that big ideas need bold thinkers – but finding governments and investors with the courage to push the button on this kind of project could prove the ultimate challenge.

U.S. C-store Count Grows as Innovation, Offer Drive Demand

The number of convenience stores in the United States rose to a record 154,958 locations as of Dec. 31, 2017, according to the 2018 NACS/Nielsen Convenience Industry Store Count.

This marks an increase of 0.3 percent, or 423 stores.

“Our continued store growth suggests that the convenience and fuel retailing industry’s core offer of convenience continues to resonate with customers,” said Chris Rapanick, director of business development at NACS, the Association for Convenience & Fuel Retailing. “Convenience stores are the destination of choice for the more than 160 million customers who frequent their community convenience store each day to refresh and refuel, whether it’s to grab a quick snack and a beverage, or a fresh-prepared meal.”

The c-store count is significantly higher than other channels of trade and accounts for 34.4 percent of the brick and mortar retail universe tracked by Nielsen in the U.S. With the exception of the dollar store channel, all other major channels had fewer units at the end of 2017 compared to the end of 2016, according to NACS.

“Convenience stores saw solid growth in 2017 due to an increased focus on innovation, improved customer experience, assortment variation and healthy investments in food services,” said Jeanne Danubio, executive vice president of retail lead markets at Nielsen. “All of these factors have enabled convenience stores to meet the needs of consumers, stretching far beyond the pump.

“This shift must continue to further expand c-store’s relevance in today’s changing retail landscape. As more retailers across channels try to cater to convenience seeking consumers, c-stores will need to continue to innovate and evolve and grow to stay ahead of the curve,” she added.

The number of single-store operators within the c-store retail space also rose 0.14 percent, or 139 units, in 2017. The total number rose from 97,504 stores at the end of 2016 to 97,643 stores at the end of 2017.

Nearly eight in 10 (79.1 percent) of c-stores, or 122,552 stores, sell motor fuels, down 1 percent from 2016, with the single-store motor fuel segment falling by 2015 stores. The drop in the number of c-stores that sell gas reflects the evolution of retail models to focus more on in-store foodservice, new store formats and the establishment of brands in more urban, walk-up locations.

State by state, Texas continues to lead in store count at 15,813 stores, or more than one in 10 stores in the U.S. It is followed by California (11,946), Florida (9,891), New York (8,725), Georgia (6,687), North Carolina (6,235), Ohio (5,686), Michigan (4,962), Pennsylvania (4, 855) and Illinois (4,759). The bottom three states in terms of store count are Alaska (217 stores), Wyoming (355) and Delaware (344).

Over the last three decades, the U.S. c-store count has increased by 55 percent, NACS noted. At the end of 1987, there were 100,200 stores; at the end of 1997 there were 108,800 stores; and at the end of 2017 there were 146,294 stores.

‘The Plan Is Not Set In Stone…but It’s a Good Plan,’ the City Said of L Train Shutdown Mitigation

Bushwick Daily

The MTA hosted the first of four open forums on the L train shutdown Wednesday night at a high school in East Williamsburg, addressing the public’s questions and concerns about that nasty L train shutdown in the not-so-distant future.

While the Department of Transportation (DOT) and the MTA released a mitigation plan last December, “the plan is not yet set in stone…but it’s a good plan,” NYC Transit president Andy Byford said in a statement recorded by the Brooklyn Daily Eagle.

MTA’s mitigation strategy breaks down (no pun intended) into three categories: subway service, the Williamsburg Bridge, and street design. But it won’t be easy, according to officials.

“Closing it [L train] down for 15 months is going to be very difficult,” said Carolyn B. Maloney, the New York congresswoman who reps Williamsburg and parts of Manhattan’s East Side.

As she stood beside Byford on Wednesday, Maloney touted the success of the new Second Avenue Subway as an example of the good things MTA can do, saying that while construction was “painful,” it is now “the best subway in the whole country.”

“Modern, airy, quiet, art — you name it,” the congresswoman said. “And we want the L train to be even better.”

Three more forums will be held through this month and next, giving the public a chance to learn more about the city’s plan for the April 2019 shutdown that will inconvenience around 225,000 riders.

Too Many Bears, Not Enough Bulls (GE in January 2018)

Looking at General Electric gets a little discouraging.

GE had a decent earnings report earlier this week, but that was quickly overshadowed by news of the Securities and Exchange Commission probe into its recent insurance charge. Still, the stock had managed to stay above $16 since they were released.

Analysts see a levered company with weak free cash flow levels and a management team stuck between a rock and a hard place.

MADISON.COM sees 4 Key Takeaways From General Electric Company Earnings: 2 Good and 2 Bad.

Having updated investors on its turnaround strategy on a presentation in November, it was important for CEO John Flannery to demonstrate that a line has been drawn in the sand, notably on its ailing power segment, but the fourth-quarter earnings report failed to do this.

the SEC is also investigating GE’s long-term service agreements (LTSA) and how the company books revenue on them. GE has LTSAs in place for things like servicing power plants and jet engines, and it has the right to payment for products or services transferred to the customer. When these payments are unconditional, they go on the balance sheet as receivables, but when they involve some other obligation (excluding time), they are called contract assets.

In the case of GE, the company has been growing its contract assets — meaning revenue and earnings are booked before the company receives cash — and the SEC is now looking into how GE has been doing this. It’s an issue investors’ attention was drawn to after the first quarter of 2017 saw a $1 billion shortfall in cash flow generation. The worry is that the SEC might rule that GE’s revenue reporting might have inflated revenue and earnings via its contract assets, particularly in its power segment.

Some of the nuances of GE’s first-quarter earnings were revealed on the January 16th press release regarding the aforementioned insurance charge. From that press release, investors already knew that GE’s EPS would come at the low end of guidance of $1.05 to $1.10, so it was no surprise when a figure of $1.05 was reported. On a more positive note, just as previewed on the previous press release, industrial cash flow from operations (CFOA) for 2017 came in ahead of guidance of $7 billion, but it was surprisingly strong at $9.7 billion, suggesting Flannery’s efforts to improve cash flow generation are already bearing fruit.

However, power markets had been described as continuing “to be challenging” on the press release, and CEO of GE Power Russell Stokes added on the first-quarter earnings conference call: “We believe that total gigawatts awarded will be even softer than we thought in December, coming in below 35 gigawatts in 2017.”

To put this into context, back on the second-quarter 2017 earnings call, former CFO Jeff Bornstein outlined expectations for the power market to decline to 40 gigawatts in 2017 — clearly, GE underestimated the weakness of the power market in 2017, and management continued to do so even up to December 2017. Stokes went on to outline that he was “working to accelerate additional restructuring efforts in 2018 to support a market that could be as low as 30 gigawatts,” and the full impact of weakening end-market conditions remains to be seen on GE’s power segment.

A key part of Flannery’s strategic plan is to focus the business on power, aviation, and healthcare. The good news is that orders in non-power segments continue to impress. In a nutshell, GE is going to need the healthcare’s strong cash flows and growth from its aviation segment in order to support its ailing power segment while management tries to restructure it.

On a headline basis, GE’s earnings came in pretty much in line with previous guidance. and there was no change to the 2018 outlook for EPS and cash flow. That’s relatively good news. However, the SEC investigation into contract assets is a concern, and power’s ongoing end-market deterioration suggests it’s going to take time to turn the segment around. Fortunately, aviation and healthcare continue to do well, and Flannery seems to be making progress on his aim to change the operational focus onto cash-flow generation.

Not much is going right for General Electric Co. these days. Except, that is, renewable energy.

The business is a rare bright spot: it’s one of only two GE units where revenue grew over the last four quarters.

Renewable energy was the fastest growing unit for GE over the last four quarters.

Today, for the first day in a long time, our Featured Image is aboit Renewable Energy!!!

070: Kylie McLaughlin – WNYP General Manager — The Roundhouse

By the Mighty Mumford

Kylie McLaughlin – General Manager and Asst. Vice President of Operations What does it take to run a shortline railroad in the 21st Century? Kylie McLaughlin answers this question, talks about using ALCOs in modern revenue service, and how women are expanding into the railroad industry. Related Episodes Western New York & Pennsylvania Santa Train…

via 070: Kylie McLaughlin – WNYP General Manager — The Roundhouse

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The Limpia Canyon Northern RR, part III (Sanderson)

Rails West

On our way to Magdalena from Pecos, we will pass through a couple of towns.  Next up, is Sanderson.  Now to kind of understand a model for what B. Smith is doing in Sanderson, you may want to read the recent Pecos Vally Southern series.  Click here to read part I.

Here is my favorite quote from the series–

“Out in the middle of nowhere, a single car to pick up, light rail, little ballast, just laid back easy going railroading.”–B. Smith

My beautiful picture A load of river rock headed to Pecos, TX, 1978.  Laid back railroading.–©B.Smith photo

Sanderson is all about what I think is the golden era of railroading–late 1960s to the end of the 1970s.  Sanderson gives B. Smith a chance to connect with a type of railroading that he initially fell in love with–Alco, F units, 40-foot boxcars, cabooses and lots of road names.  He occasionally will even break out some…

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