General Electric Corporation (NYSE:GE) shares fell 12.8% in September, according to data provided by S&P Global Market Intelligence. Add that onto previous losses, and GE ended September down more than 35% for the year. The industrial company has been dealing with a string of problems lately, including ongoing issues within what remains of its finance unit. But bad news out of the already struggling power division was the main reason for the painful monthly decline this time around.
General Electric disclosed late in the month that oxidation issues with a blade component in some of its newer gas turbines would affect customer operations. The stock, which had been trending largely sideways through most of the month, fell sharply on the news. The power unit had already been struggling with weak demand from the electric industry, and adding quality issues to the list of negatives is clearly an undesirable development.
The company tried to put the best face on it, explaining that complex new products often require "fine-tuning." However, the issue paints a bleak picture for a division that is set to be a core piece of the business following a major corporate revamp. And a quick fix is highly unlikely, since many of the problems facing GE will take time to correct.
GE's steep price decline shows just how frustrated investors are with the company. And the board seems to have gotten the message, announcing the ouster of the CEO on Oct. 1. The shares moved swiftly higher on the news. That said, conservative investors should take a wait-and-see attitude here. Although new CEO Lawrence Culp has a great pedigree, there are no easy solutions to the problems he is inheriting. GE remains a turnaround story at this point.