Farrow on GE: ‘Our goal is keep them’
Corporation’s future in question following news of $15B payout

By Cara Spoto - Freeman Staff

Jan. 18, 2018

WAUKESHA — As investors speculate whether General Electric’s financial woes will lead to a wholesale breakup of the company, local leaders are working to ensure that whatever future awaits the corporate titan includes Waukesha County.

County Executive Paul Farrow said Wednesday that his office is working with the Waukesha County Center for Growth on the issue, and has also reached out to company officials.

While GE announced last June that it would be closing its Waukesha engine plant in 2019 and moving some 300 jobs to Canada, its medical device wing, GE Healthcare, employs about 3,100 people in the Waukesha area, Farrow said.

That number includes those employed at the division’s headquarters in Waukesha and at offices in Wauwatosa, he said.

“When you look at GE, it is such an incredible corporate steward in this region, and has been so for a long time. Our goal is keep them, whatever the new entity might look like,” Farrow said.

“I know we are very early on in the conversation, but we have already reached out to individuals at GE to say ‘You guys know what we have: We have an incredible county. We’ve got some of the lowest unemployment in the country. We have an incredible workforce that’s here. What can we do to help you guys realize that this is where you want to have the health care entity?’”

$15 billion hit

An announcement Tuesday that GE will pay out $15 billion for miscalculations made by its insurance subsidiary North American Life & Health is what has sparked conversations about a possible company breakup.

Part of GE’s Capital division, North American Life & Health helps cover the risks assumed by insurers that sell policies to consumers.

The subsidiary stopped writing new policies in 2006, but just before that it reinsured about 300,000 policies covering the long-term health care of people in the final years of life.

The insurer underestimated how much it would cost to pay for the care of those policy holders who lived longer than projected.

The mistake was magnified by low interest rates that reduced the returns on the premiums the subsidiary collected.

Investors had known that the problems at North American Life would result in a financial hit to GE since last year, but the impact turned out to be about five times more than anticipated, RBC Capital Markets analyst Deane Dray told the Associated Press.

‘‘This is deeply disappointing,’’ GE CEO John Flannery acknowledged.

GE’s stock fell 55 cents, or nearly 3 percent, to close at $18.21 Tuesday on the news.

Breakup talk

The downturn probably would have been more severe if Flannery had not hinted that GE might take the radical step of splitting up the main company’s three main components — aviation, health care and power — into separate businesses.

Founded in 1892, GE has already has shrunk dramatically since it became entangled in the financial crisis a decade ago, and Flannery has previously vowed to shed business units worth more than $20 billion over the next year or two.

In a Tuesday conference call, Flannery told analysts that there has been an ongoing review of how to wring the most value from GE’s disparate businesses since he succeeded Jeffrey Immelt as the company’s CEO five months ago.

‘‘All options on the table, no sacred cows,’’ Flannery said during the call.

— The Associated Press contributed to this report.