GE’s Meltdown Might Be the Best Thing to Happen to It

The Great General Electric Debacle of 2017 continued into 2018 as the company on Wednesday reported fourth-quarter earnings that fell short of analysts’ expectations. The dismal details: earnings per share of $0.27 net of special charges vs. a Wall Street estimate of $0.29; revenue of $31.4 billion vs. an estimate of $34 billion. This from a company once famed for never, ever missing Wall Street earnings estimates. GE was the worst performing stock in the Dow last year, and it has continued to fall in 2018.

Yet GE’s meltdown may be the best thing that could have happened to the company. That’s because it has forced management to propose a long-unutterable possibility: that GE could be broken up. In truth it should have been broken up long ago. Now things are so bad that it’s hard to see a significant improvement of this sorry mess otherwise.

The trouble with GE is simple and systemic. It’s a typical crummy conglomerate. Its transformation into a conglomerate began after World War II, when it expanded into businesses unrelated to electricity or each other—missiles, computers, satellites, coal mining, and many others. Conglomerates were all the rage in the 1960s, but as they reliably underperformed the market, most of them, such as ITT, Litton, and LTV, got taken apart. Not GE. The 1970s were a dismal decade for stocks, yet GE did even worse than the market, amplifying cries to bust up this company.

Then something happened. In 1981 Jack Welch became CEO, and during his 20-year tenure the company outperformed the market so spectacularly that talk of a breakup faded away. Yes, he ran the place during a historically great bull market. But GE performed much, much better than the market. Then, after he stepped down, GE reverted to its usual market-trailing performance. It again revealed its true character as a crummy conglomerate.

How crummy? If you had invested $100 in the S&P 500 in 1945, you’d have $245,738 today. But if you’d invested $100 in GE, you’d have only $144,478 including dividends, even with the rocket boost to the stock contributed by Welch. And without that boost? If GE had merely matched the S&P 500 during his tenure, which would still have beaten GE’s average performance under the post-war CEOs before and after him, then you’d have only $43,098.

It’s true that not all conglomerates perform terribly. The strongest counterexample is Berkshire Hathaway, which Warren Buffett happily calls “a sprawling conglomerate.” But this proves little. The lesson seems to be that a conglomerate with a genius CEO like Buffett or Welch can perform terrifically. Unfortunately, a strategy that requires a genius CEO is not a sustainable strategy.

Some analysts argue that GE’s businesses are so entangled financially that separating them would cost more than it’s worth. That analysis fails to value the entrepreneurial energy that can get unleashed in a breakup. Separating GE into three companies—jet engines, power systems, health care—would be a gamble for sure. But with the stock in a hole and management offering no clear plan for recovery, it’s finally time to face reality. GE has no reason for existing in its present form. Its component businesses should be set free.

GE warns 2018 could be even worse than it expected for its embattled power business

“We said ’17 issues would carry over into ’18 in power, but it’s still a good franchise in power,” GE chief executive John Flannery said in a conference call on Wednesday.

The market for GE’s pricey power turbines has been weak due to the growth of renewable energy supply from wind and solar farms.

In 2018, GE is bracing for its worst year of gas turbine installations in about 15 years.

NY-NJ port grapples with rail delays

In a missive to port users outlining the problem, the port said it is working with CSX Transportation and Norfolk Southern Railway to clear the rail backlog.

Well! It is about time to admit a problem.

In a recent WebPage, we have been careful not to include the Port of New York & New Jersey in our planning. HERE IS WHY.

A New Hudson Bridge, Revived Beacon Line, HYPERLOOP and More

Video shows gates down as bicyclist tries to beat Brightline train and is fatally struck

Boynton Beach Police Department via BRIGHTLINE

See Video:

Sorry for not “imbedding” video. Beyond our technology. Thanks to Miami Herald we have it!

Surveillance video from the front of the Brightline train shows the crossing gates were down when the train struck and killed a Boynton Beach man as he rode his bicycle across tracks in Boynton Beach on January 19, 2018. Boynton Beach Police Department.

Video released this week by Boynton Beach police confirmed what law enforcement officials said from the beginning: The man fatally struck by the Brightline train last week crossed the tracks even though the gates were down.

The video, which was taken from a camera mounted to the train, shows the train speeding along as the bicycle comes into its path. Brightline is capable of speeds up to 79 mph.

On Jan 17, Jeffrey King, 51, was the second person killed by South Florida’s high-speed commuter line since launching the service to the public on Jan. 13.

Melissa Lavell, 31, was killed Jan. 12 — the commuter line’s VIP opening day — when she, too, tried to cross the tracks after the gates went down, Boynton Beach police said. The Boynton Beach woman was hit not far from where King was struck.

Guess it too a few days to send film to get developed!

Be careful watching video. Next video is alligator getting caught.

Guess know Brightline can move on successfullyat 79 mph!