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GE hikes 2008 cost-cutting goal to $3 billion

General Electric Co chief Jeffrey Immelt said on Wednesday that the company has raised its 2008 cost-cutting goal by $1 billion.
/ Source: Reuters

General Electric CEO Jeff Immelt said the U.S. economy is the worst its been since the burst of the dot-com bubble and that housing hasn’t been in such dire straits since the Great Depression.

Less that two weeks after the conglomerate shocked investors with a profit warning and revealed that its first-quarter earnings had unexpectedly fallen 6 percent, Jeff Immelt said things could get worse for the U.S. economy.

Immelt told shareholders at the company’s annual meeting that because of current conditions, GE will increase its planned cost cutting from $2 billion to $3 billion.

“We are in the toughest economy since 2001 and the worst housing crisis since the Depression,” Immelt said. “Banks have written off more than $250 billion. ... Days of easy credit have turned into months of no credit at all. While I am confident about the economy long term, we could see even more difficult times ahead.”

GE’s first-quarter earnings report triggered a plunge that wiped more than $46 billion from its market capitalization and saw the company’s stock fall nearly 13 percent.

Many investors felt broadsided because GE said as recently as March that the company would see profit and revenue growth of 10 percent in 2008. The company now projects earnings to be 5 percent or less.

Immelt said GE executives are making changes in the company’s operations and planning, including more internal forecasts, with Immelt reviewing the reports weekly.

“This will ensure that there are no time gaps between how we describe the company and what we deliver,” he said.

Immelt said at the time that GE’s performance deteriorated rapidly toward the end of the quarter because capital markets had frozen, but he said Wednesday that the situation has improved.

He said financial service earnings may decline between 5 percent and 10 percent in 2008, but said that exceeds the performance of peers.

Immelt defended the company’s performance and brushed aside the mention of selling off businesses.

“In the last five or six years I’ve sold $50 or $60 billion of business,” he told reporters. “I’ve acquired $70 or $80 billion of business. This has probably been the most active portfolio change in the history of the company and it would be hard to find another industrial company that’s done anything close to what we’ve done.”

Under Immelt, GE sold off the company’s plastics and insurance businesses and has been increasing its market share in emerging markets, such as Asia and Latin America.

Immelt said he accepts criticism from analysts who said the quarterly results damaged his credibility. Until the earnings report, GE regularly met its targets.

“My track record over a long period in this company has been good,” he said. “I expect it to be good in the future. You don’t do a job like this if you can’t take a punch.”

Fairfield, Conn.-based GE is having its annual shareholders meeting in Erie, the site of its transportation business headquarters.