General Electric slashed its stock dividend to just a penny on Tuesday amid continued losses, and disclosed that US authorities have broadened an investigation into the company’s accounting.
GE reported a third-quarter loss of $22.8 billion following a massive downgrade in the value of key assets held by the ailing industrial giant, a move that sparked new scrutiny by US officials.
Chief Executive H. Lawrence Culp, who was tapped earlier this month to try to lead a recovery, also announced a plan to split up the troubled power division and signaled that a turnaround would take time.
Investors have been hopeful that Culp, an outsider to GE as the former chief executive of the conglomerate Danaher, will change the company’s fortunes and the share price initially rose in pre-market trading after the results were released.
But the stock price retreated after Chief Financial Officer Jamie Miller disclosed on the conference call that the US Securities and Exchange Commission had expanded an ongoing investigation into the company’s accounting.
That includes the latest $22 billion charge, the bulk of which concerns GE’s 2015 purchase of power assets from French company Alstom.
The Justice Department also is probing the matter, Miller said.
GE slashed the quarterly dividend to just a penny from 12 cents previously. It had been 24 cents prior to a November 2017 cut.
‘Strong company’
The loss in the latest quarter compares with profits of $1.3 billion in the year-ago period and is due to a $22 billion write-down announced when Culp’s surprise appointment was unveiled on October 1.
Culp said the latest steps were key to his effort to get a grip on the century-old company’s struggles.
‘This is a strong company,’ Culp said on a conference call with analysts. ‘We can do better but this is an important company and I’m pleased to be on the team.’
‘Everything is on the table’ with respect to the power business, he added.
Revenues fell 3.6 percent $29.6 billion, due in part to a big drop in power, although sales were higher in most of GE’s other segments. 
Aviation and health care, two businesses that have held up well in recent years, posted gains. And revenues also increased in oil and gas, a division that had sputtered until recently.
Culp said one of his objectives is ‘wring out the undo optimism’ around the power business ‘so we can establish a baseline we can build on.’
Shares of GE, which was bumped from the prestigious Dow index earlier this year, slumped to nine-year low and finished at $10.18, a single-day loss of 8.8 percent.
CFRA Research analyst Jim Corridore said the drop was due to an exodus of shareholders who had held onto GE stock because of the dividend, and because of concerns over the federal probes.
‘Anytime you see an investigation like that by both the SEC and the DOJ it starts to make you wonder, what’s going on in their accounting? Are their books clean?’ Corridore said.
Power woes continue
GE’s big problem continues to be the power division, which has been beset by overcapacity due in part to the growth of renewable energy sources that has dented demand for GE’s turbines.
GE has described the weak market conditions in power as a multi-year issue and signaled again on Tuesday that demand remained poor.
Adding to those woes in September was a technical glitch that temporarily shuttered new plants installed in Texas. Worries about the problem sent shares to multi-year lows that only began to turn around when GE announced Culp’s surprise appointment on October 1.
GE, under former CEO John Flannery, eliminated more than 12,000 jobs, replaced top executives and sold some assets. 
Culp now plans to split the power business into two units, one focusing on gas and industrial services and the other comprising steam, grid solutions, nuclear and power conversion.
GE must ‘materially’ change its power organization, Culp said. ‘It has become clear to us that we must simplify power.’ 
Flannery also announced plans in June to shed its oil services and health businesses. Some analysts had questioned the wisdom of exiting health care, a reliable cash cow.
But Culp said the previously announced plan on health was ‘probably’ the best course. During the hour-long conference call, Culp repeatedly endorsed the broad outlines of the June plan.