GE Facing Sales Decline Due to 'Supply Chain Disruption' Ahead of Split

(Photo by Bloomberg News)

[Asia Economy Reporter Yujin Cho] General Electric (GE) of the United States recorded earnings below market expectations in the fourth quarter of last year amid global supply chain disruptions.

According to GE IR materials on the 25th (local time), GE's revenue in the fourth quarter of last year was $20.3 billion (approximately 24.295 trillion KRW), a 3% decrease compared to $21 billion in the same period last year. This also fell short of the market expectation of $21.3 billion.

During the same period, the net loss was $3.9 billion, significantly increasing from the $2.4 billion loss in the same period last year. Converted to earnings per share, it was 82 cents, below the market expectation of 85 cents based on financial information provider FactSet.

The company explained that the deterioration in performance was due to prolonged supply chain disruptions and increased debt repayment costs.

GE was hit by worsening supply chains across all business divisions in the fourth quarter of last year, with the healthcare sector suffering the most damage.

Lawrence Culp Jr., GE CEO, stated, "This year, we expect the greatest impact in the onshore wind business due to rising transportation and raw material costs."

However, he expressed optimism that inflationary pressures would disappear as supply constraints ease. He noted that the Omicron variant did not significantly affect demand but caused some disruptions in workforce supply.

Earlier, GE announced in November last year that it would gradually split into three independent companies focusing on aviation, energy, and healthcare by early 2024.

As efforts to reduce debt amid a sharp decline in sales reached their limits, the company took the last-ditch measure of 'corporate split' amid concerns that its very survival could be threatened.

The continuing aviation business division, the surviving entity, will retain the name 'GE' and plans to hold a 19.9% stake in the healthcare division. CEO Culp will lead the aviation division and serve as the non-executive chairman of the healthcare division.

The Wall Street Journal (WSJ) evaluated this split decision as "marking the end of years of company-wide restructuring efforts that began in 2018."

Founded in 1892 by Edison as an electric consumer goods business, GE grew into the world's largest manufacturer by entering nearly all manufacturing sectors, including home appliances, medical devices, aviation and automotive engines, nuclear fuel, and nuclear power plants.

In the 1930s, GE also entered the financial industry, aggressively expanding its business with subsidiaries such as GE Capital. However, it suffered irrecoverable losses in its capital business, which was its financial lifeline, due to the subprime mortgage crisis, and has been undergoing intensive restructuring since 2018.

This content was produced with the assistance of AI translation services.