Jeff Immelt, the chief executive of General Electric for seven years, is fighting to shore up his reputation after the conglomerate shocked Wall Street with a decline in earnings and a profit warning – less than a month after Mr Immelt made an upbeat presentation to shareholders.
GE is one of the most popular shares in the US, renowned for meeting or beating its earnings guidance quarter after quarter, and its leaders have traditionally been among the most famous faces of corporate America.
But yesterday analysts questioned GE's attempt to pin the blame for its profit warning largely on the collapse of Bear Stearns, which Mr Immelt said had changed the financial landscape in the final two weeks of its financial quarter and had led to a slump in profits at its commercial lending division.
They demanded to know whether he had been unaware of gathering problems inside the sprawling company – whose products range from simple electric light bulbs to aircraft engines and nuclear reactors in businesses stretching across manufacturing, broadcasting and financial services.
And he was forced to defend why he had said, only last December, that a 10 per cent rise in earnings this year was "in the bag" and then reiterated that guidance and bullish outlook when addressing investors in a webcast on 13 March.
"Two days after the webcast, the Bear Stearns situation took place, and the last two weeks in March were a different world in financial services," Mr Immelt said. "I understand your frustration. I'm not going to be defensive about it, this is a company that's delivered for a long time. But the franchise of the company is very strong, and I feel the same about the strategy of the company."
GE had been expected to post quarterly earnings, excluding discontinued operations, up 6 per cent, but actually reported an 8 per cent decline. It slashed its guidance for the full year to one of flat-to-5 per cent growth.
The worst problems were in the commercial finance division, affected by problems in the commercial real estate market that have been gathering since the start of the year. GE sold $1.7bn (£863m) of property in the quarter, $900m less than it expected. It also had to write down the value of commercial real estate derivatives by $55m. In all, the commercial finance division posted a 20 per cent slide in profits.
But there were also disappointments in other divisions. The healthcare business missed sales expectations in the US, and GE also sold fewer household appliances in March than it expected – raising concerns that the debt-burdened US consumer is holding back on big purchases in greater numbers even than feared.
Mr Immelt took over from the legendary Jack Welch in 2001. He has retooled GE by buying high-growth businesses and divesting older, staid, divisions. His reversal of fortune sent GE shares down 13 per cent, its worst one-day fall since 1987.