GE Healthcare business restarts
HARTFORD, Conn—GE Healthcare's surgery business started up again Monday, 20 months after
GE Healthcare announced it received the go-ahead to reopen from the U.S. Food and Drug Administration by satisfying requirements of a January 2007 consent agreement with the government. The company, a subsidiary of Fairfield-based GE, shut its plant in Salt Lake City in September 2006.
The health care business, based in Chalfont St. Giles, England, reported a 17 percent drop in profits in the first-quarter of 2008, to $528 million from $637 million in 2007. The loss contributed to GE's lower-than-expected earnings and a profit warning, though deteriorating financial services were blamed for much of the quarter's poor showing.
Still, the health care loss "compounded the disappointment in the first quarter at the very least," said analyst Matt Collins at Edward Jones in St. Louis.
The FDA said in January 2007 that it found quality control problems. For example, the agency questioned whether GE Healthcare's electronic complaint system tracked complaints and found that the business failed to file required malfunction reports as technicians fixed machines, said a spokesman for GE Healthcare.
Pete McCabe, president and chief executive of GE Healthcare Surgery, said GE officials are confident they've improved operations.
"We reviewed every nook and cranny of production to improve it," he said. "We've spent almost a million engineering hours improving the product and testing."
McCabe said GE expects it will face trouble regaining customers.
"That's a very real concern given that we've been out of the market for 20 months," he said.
However, the business has a strong backlog with 300 products being shipped in the next 10 days, McCabe said.
"The trucks are at the back dock now," he said.
Collins said a loss of market share "seems like a certainty."
GE Healthcare also has been hit with reduced federal Medicare and Medicaid spending, he said.
It was the only GE business to make less money in 2007 than it did in 2006. Profits for the year were about $3.06 billion, down from $3.14 billion in 2006, or 3 percent.
The C-arm that won federal approval for manufacturing and distribution is a fluoroscopy device that uses X-rays to show real-time imagery inside a patient as an alternative to full surgery.
The health care business employs 600 workers. Only a few were furloughed during the shutdown, McCabe said. Nearly 300 engineers remained at work, inspecting the product, and others serviced products, he said.
Because of the size of the backlog, GE Healthcare expects to add employees, McCabe said.
GE shares closed at $33.18, down 16 cents.
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