GE couldn’t wait on its new sharp warnings…

October 3, 2008

On Wednesday, the same day that General Electric (GE) announced a $3 billion infusion from Warren Buffett, it filed a three-sentence 8-K about the deal.

But it was the exhibit attached to the 8K that caught my attention: new sharply worded warnings about the state of the economy and its impact on GE. Indeed, if I were a Congressional leader trying to rustle up votes for the bailout bill which is on the Floor as I type, I’d be handing out copies of this, instead of the bloated 451-page bill. Here’s a snippet:

Current levels of market volatility are unprecedented.
The capital and credit markets have been experiencing extreme volatility and disruption for more than 12 months. In recent weeks, the volatility and disruption have reached unprecedented levels. In some cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers. A large portion of GE Capital’s borrowings have been issued in the commercial paper markets and, although GE Capital has continued to issue commercial paper, there can be no assurance that such markets will continue to be a reliable source of short-term financing for GE Capital.

Of course, in the very same filing, there’s also something for those against the bailout bill: “Even if adopted, there can be no assurance what impact the (bill) will have on the financial markets, including the extreme levels of volatility currently being experienced.”

Revising risk factors mid-quarter isn’t something that most companies do lightly. Given that GE is set to release earnings in a week and that it usually files it Q on the same day the Q comes out about two weeks later, the new warnings in the 8K seem very unusual, especially in light of the Buffett infusion. This morning, Citigroup analyst Jeffrey Sprague lowered his earnings estimates for GE for the next three years. “That GE had to pay so dearly for capital highlights the severity of the squeeze going on in the broader economy, which may erode the credit quality of its portfolio and pressure many of its non-finance business,” Sprague said in his report.

When a blue-chip like GE starts issuing these sorts of urgent warnings, you have to wonder what other companies are thinking, but not disclosing.

Image Source: REUTERS/Fred Prouser

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