GE is broken. Fixing it will be long and difficult

Restoring General Electric powered to greatness, as well as just mediocrity, won’t be quick or easy.

GE’s (GE) fall from grace has forced the iconic organization to take drastic guidelines just to give up the bleeding. This week, GE cut its beloved dividend in half, and launched plans to sell off the century-previous railroad business aswell as at least 12 other units.

And it took years to run GE in to the ground, there’s an evergrowing realization outside and inside the business’s Boston headquarters that fixing it’ll be longer and difficult. GE stock nosedived another 7% on Monday, its worst moment since April 2009, after fresh CEO John Flannery detailed his turnaround vision.

Flannery warned that 2018 will be difficult, dubbing it a good “reset year for us.”

That’s not specifically music to the ears of GE’s long-suffering shareholders, particularly when the rest of the stock market is normally booming. GE shares shut at a five-and-a-half year low on Monday.

GE faces a “hard slog forward,” Cowen & Co. analyst Gautam Khanna wrote in a research report on Monday.

Scott Davis, mind analyst at Melius Analysis, said it’s still “start” for Flannery to “fix the GE mess he was handed.”

While Davis has “high expectations,” he wrote in a report that GE is facing a “debacle” and it’s “hard to have substantially confidence yet.”

Related: GE cuts dividend for second period since Great Depression

GE is not simply one of America’s most storied companies. It’s one of the country’s biggest companies, with practically 300,000 personnel, and one of its most broadly held stocks.

Facing a significant cash crunch, GE features lower its dividend to save about $4 billion a year. It also plans to jettison considerably more businesses, including the transportation division which makes trains and railroad parts. GE is even removing the lamp business that extended symbolized the innovative company. And it’s thinking about relinquishing many stake in Baker Hughes (BHGE), which was created when it coupled with GE’s oil-and-gas assets.

Flannery has said these sales are necessary to simplify GE and refocus the business on core areas: aviation, health care and power.

“Complexity has harm us,” the new GE CEO said.

Yet even a slimmed-down GE it’s still quite complex, making from jet motors and MRI machines to power plants.

And it’ll take time to offer off these various businesses, especially the kinds like transport that GE admits are slumping right now. Flannery warned that the transport division faces a “protracted slowdown in THE UNITED STATES” due in part to shrinking coal shipments.

Related: GE is breaking up with the lamp

The other problem is that some of the businesses GE is keeping are in a whole lot worse shape. GE nowadays expects to receive just $1.00 to $1.07 per show next year. That’s approximately half the target GE had less than a year ago.

GE warned it will require one or two years to repair its power division, which supplies above 30% of the world’s energy in 140 countries. The business enterprise has been strike hard as utilities approach from fossil fuels and only renewable strength like solar and wind. GE expects a “complicated market into 2019,” that will force further cost-cutting.

“It’s a heavy lift to turn around,” Flannery admitted.

Davis put it this way: “Power continues to be a mess.”

That mess threatens to delay efforts to repair GE’s cash crunch. Free cashflow, which measures how much cash is generated after investing in the business, possesses dropped for six-straight years.

GE said it again expects industrial free cash circulation, which includes dividends from Baker Hughes but excludes deal taxes and pension obligations, of $6 billion to $7 billion in 2018.

That’s barely enough to covers even the lowered dividend payments.

But Cowen’s Khanna thinks GE’s “cherry-picked” definition of free cashflow has inflated its numbers, making things appear much better than they are. He noted that GE is normally borrowing $6 billion to fund its pension obligations through 2020.

Underlying free cashflow “appears close to zero as most industrial firms would establish it,” Khanna wrote.

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