GE's Net Tumbles 35% on Finance-Unit Woes

CEO Immelt Expects Tight Business Lending, Order Cancellations and Falling Consumer Confidence to Prolong Downturn By PAUL GLADER General Electric Co. on Friday said first-quarter earnings fell 35%, and the company cautioned that its key businesses remain under pressure. The drop was fueled by ongoing problems at its GE Capital financial arm, which saw revenue fall 23% and profit decline 58% to $1.12 billion because of loan losses. Those results were buoyed by a $1.2 billion tax benefit. "The downturn continues," GE Chairman and Chief Executive Jeff Immelt said during a conference call. Mr. Immelt said he expects business lending to remain tight, order cancellations to continue and consumer confidence to decline as unemployment rises. The conglomerate, based in Fairfield, Conn., posted net income of $2.92 billion, or 26 cents a share, compared with profit $4.51 billion, or 43 cents a share, a year ago. Revenue dropped 9% to $38.41 billion. Analysts polled by Thomson Reuters expected earnings of 21 cents a share on revenue of $39 billion. GE's shares rose 12 cents to $12.39 in 4 p.m. composite trading Friday on the New York Stock Exchange as investors focused on a better-than-expected profit. GE Capital remains the biggest source of trouble: The unit saw losses and rising delinquencies in commercial real estate, European home mortgages and private-label credit cards in the U.S. Worries about the financial unit's slide caused credit agencies to pull GE's triple-A credit rating and sent shares to a low of $5.70 in early March. GE said consumer-credit delinquencies in North America are stabilizing, with fewer customers paying bills late in the fourth and first quarters. The company said it expects to recover most of the $10 billion of potential loan losses it currently holds, through insurance, collateral sales and collections. GE reduced its reliance on short-term-debt financing to $58 billion in the quarter from $102 billion a year ago. Executives confirmed that GE Capital is no longer paying a 10% dividend to the parent company, to preserve cash, and reiterated they don't expect GE will need to raise new equity in coming quarters. "We will remain profitable for the year," said Mr. Immelt. Several GE units posted lackluster results, too. Equipment orders fell 21% overall as the weak economy depressed demand for its big turbines and jet engines. GE said it still has an equipment-order backlog of $50 billion. The company also reported weakness in health care and appliances and lighting, and in NBC Universal's movie studios, theme parks, TV network and cable channels. Mr. Immelt said the company suffered $500 million in order cancellations in its energy and aviation units during the quarter. He warned it is forecasting "several quarters of negative orders." Write to Paul Glader at paul.glader@wsj.com