You’d think having $48 billion of cash on hand would be enough to get people to stop worrying that you might run out of it. The fact that, in GE’s case, it hasn’t highlights concerns about the ongoing deterioration of GE’s balance sheet.
WSJ: Analysts differ on how vulnerable GE is to cash woes, but most agree it is the area to monitor. Goldman Sachs research shows GE’s loan loss reserves are at 2%, compared with 3% for U.S. banks. Customer progress payments — deposits customers make on future orders — started to diminish in the second half of 2008 to $2.9 billion, down 37% from $4.6 billion in 2007, and Goldman predicts further declines…
“We don’t see a need where we would have to raise external capital,” said Chief Financial Officer Keith Sherin during the investor meeting. He noted GE can still raise debt at the parent level, largely through a federal-government program that guarantees banks’ bonds, and can cut costs further or sell assets if need be.
For a detailed analysis of GE’s balance sheet concerns, see The Earnings Bomb Hidden Inside GE Capital >
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