General Electric Exec Goes to France to Promote Alstom Deal and General Motors Fined Maximum Amount For Recall

Two industrial giants are making headlines as the market fails to rebound on the final trading day of the week.

May 16, 2014 at 3:00PM

Stocks were starting to gain ground by midafternoon after yesterday's sell-off, with the Dow Jones Industrial Average (DJINDICES:^DJI) trading 28 points higher, or 0.17%, following positive news from the housing industry. Housing starts rose 13.2% in April, which was much higher than the expected 3.1% increase, driven by a strong 43% increase in multifamily housing starts. Investors obviously hope to see continued improvements in the housing industry, which is a huge contributor to the health of the overall economy.

With that in mind, here are two companies making headlines in the market today.

Inside the Dow, General Electric (NYSE:GE) was sending an executive to Paris today to promote the company's $17 billion bid to buy the energy business of French conglomerate Alstom. The French government this week gave itself the power to block the deal, and French Economy Minister Arnaud Montebourg has been encouraging Siemens to submit a competing offer in an attempt to keep the business in European hands.

"We appreciate the importance of the energy sector to France, and we will continue to have open and productive discussions with the government," General Electric said in a statement.

GE this month sent a letter to French President François Hollande saying it would consider taking on French investors in Alstom's hydropower unit and selling Alstom's wind power unit to French investors. GE also said it could make concessions with Alstom's nuclear technology.

A successful deal would be the largest acquisition in General Electric's history and boost the company's plan to focus on growing revenue from its industrial and energy businesses -- a strategy that investors have cheered.


General Motors headquarters in Detroit. Source: General Motors Company

Outside the Dow, the U.S. government issued the maximum possible $35 million fine against General Motors (NYSE:GM) for waiting too long to recall 2.6 million cars with faulty ignition switches. Along with accepting the penalty, General Motors agreed to give regulators full access to the results of its internal investigation into the technical defect that has been linked to at least 13 deaths.

"We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety," GM CEO Mary Barra said in a statement, according to Automotive News. "We will emerge from this situation a stronger company."

For current or potential investors, this $35 million is a drop in the bucket compared to last quarter's charge of $1.3 billion that nearly wiped away all of the company's profits -- and rightfully so. The $35 million fine will be on top of the $200 million charge that General Motors expects to take in the second quarter related to this week's announcement of five additional recalls covering nearly 2.7 million vehicles.

This is just another hurdle General Motors has created for itself while trying to rebound from its bankruptcy roughly five years ago. The company has continually lost market share over the years and now faces arguably a more battered brand image than ever before. General Motors still has much potential as a company and an investment, but it has a ton of work to do to fix its brand image and operations. Investors would be wise to monitor sales going forward in case its brand image causes car buyers to shop at GM's competitors. 

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Jun 12, 2015 at 5:01PM

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