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GE forecasts slow start

Boston, Jan. 18 (Reuters): General Electric Co. on Friday said a $ 1.5 billion loss at its troubled reinsurance unit beat down fourth-quarter earnings, and forecast a slow start to this year as it can no longer rely on gas turbine sales and pension income to help it outshine other U.S. corporations.

GE's net income fell 21 per cent in the fourth quarter, capping a year in which its stock fell nearly 40 per cent and the company failed to reach its annual benchmark of double-digit earnings growth.

The global conglomerate, whose operations cover a broad range of businesses from making jet engines to television broadcasting, said profit in the current quarter could fall as much as 10 per cent because of fewer gas turbine shipments.

Most analysts were expecting first-quarter earnings to dip about 3 percent, according to research firm Thomson First Call.

GE said its power systems unit, which makes gas turbines and has been a huge profit driver in recent years, could see net income fall as much as 50 percent in the first quarter. After a period of rapid expansion, capital spending on power-generation facilities has slowed.

Prolonged stock market declines also zapped GE’s pension fund surplus, which fell to $ 5 billion at the end of 2002 from about $ 14 billion a year earlier.

GE Chairman Jeff Immelt said the surplus could dwindle even more. “If the stock market performance is relatively flat, we'll have a couple of billion dollars of surplus at the end of (2003),” Immelt said.

GE estimated that pensions would decrease its net income by $ 300 million this year. That’s a far cry from previous years when income from pension plans was a solid contributor to GE’s bottom line. In 2001, for example, pension income contributed $ 1.48 billion to GE’s pre-tax earnings.

Shares of GE, based in Fairfield, Connecticut, closed down 15 cents to $ 24.88 in trade on the New York Stock Exchange.

“Right now, this is sort of the worst of all worlds for business conditions,” said Morgan Stanley analyst Scott Davis. “We’ve got sluggish economic conditions, we’ve got geopolitical risk that’s holding back capital spending, and we have higher raw material costs.”

“GE is having a tough time growing earnings in this environment, just like every other company,” Davis added.NET

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