Armageddon, not

Four years ago, General Electric lived up to its reputation as a bellwether for the global economy. The maker of gas turbines and jet engines issued a profit warning that foreshadowed the financial calamity ahead. On Friday, the US conglomerate, which generates half of its sales abroad, revealed it merely fell five per cent short of revenue estimates in the fourth quarter of last year. That’s hardly ideal for investors still pining for the $41 apiece GE shares once fetched (they’re at $19 on Monday), but it should be reassuring for those worried about a retrenchment of global growth.

Chief Executive Jeff Immelt nodded to the challenges in Europe. But, given the euro zone’s financial afflictions, it’s not surprising the $200-billion company took a bit of a hit in the region. Its European healthcare revenue, for example, dropped seven per cent as government austerity programs took hold. Yet, for all the drama in the markets in the second half of last year as investors swung between expecting Armageddon and purgatory in Europe, there was very little in GE’s fourth-quarter report to suggest customers were bracing for a worldwide event on the scale of 2008.

GE’s backlog of orders, for instance, reached a record $200 billion, driven by demand for energy-related building and services. And, its finance arm offered little excitement. That’s a good thing. GE Capital nearly dragged its parent into the abyss when funding markets shut down in 2008. It now has a cash stash of $77 billion, giving it ample room to meet long-term debt obligations in 2012, even if the European crisis caused lending markets to seize up. That’s encouraging, since it means GE — and the same could be said of other large companies that have built big cash piles — isn’t likely to exacerbate a crisis the way it did four years ago, when it scrambled for short-term funds.

That’s not to say GE is immune to, for example, a crackup of the euro zone. The knock-on effects of a deep recession in Europe would not only hit its businesses there; they would dampen growth in the rest of the world. But, it’s somewhat reassuring that even as financial markets fret about that prospect, business is still getting done.