Why General Electric is Heading South: Climate Action Partnership says it all

“GE slashes earnings view for 2008, but shares gain” by Marketwatch shows that General Electric is off about 38% from its high of about 42 only a year ago. Furthermore, “GE currently makes about 45% of its earnings from the financial unit, called GE Capital.”

From where we sit, General Electric’s problems are the direct result of a management belief, as exemplified by the company’s membership in the Climate Action Partnership, that the company does not have to create genuine value to earn a profit. As described by Kimberly Strassel’s “If the Cap Fits: Why our CEOs are warming to Kyoto,”

    Finally, there’s General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.

In other words, instead of looking for ways to get the cost of solar panels and wind turbines down to where utilities and even homeowners will prefer them over traditional electricity sources (also known as “making money the old fashioned way, by earning it”), GE apparently wants the government to pass laws to compel utilities to buy his company’s products. This attitude, as well as a shift in resources from GE’s traditional manufacturing strategy to financial services, probably explains a good part of the company’s troubles.

On another note, another Climate Action Partnership member wanted the government to impose carbon emission caps, and a cap and trade regime, so it could make money by taking commissions on carbon credit trades. Its name was Lehman Brothers.

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