GE’s Asbestos Problem Is Terrible News for the Owners of GE Stock 

Allegations that GE sold asbestos to its employees in Canada put the company in a terrible light

The turnaround plan launched by General Electric’s (NYSE:GE) CEO, Larry Culp, has been doing wonders for GE stock in 2019. But now, up 26.4% so far this year, including dividends, through Sept. 16, GE stock could be badly hurt by some news from Canada.

The Peterborough Effect

GE Stock Investors Want the Real GE to Please Stand Up
Source: testing /

General Electric’s had a plant in Peterborough, Canada, for 126 years, until GE permanently ceased operating in the city last December.

Peterborough got the nickname “Electric City” as a result of its long association with GE, and one could say that it was Peterborough that helped the company become a dominant player in Canada.  

At the end of the day, both parties benefited from the long-time association. 

However, it was recently alleged that General Electric had sold leftover asbestos scrap from its Peterborough plant to its workers for as many as 35 years.  That allegation ought to make the owners of GE stock quite nervous. 

Just as GE is turning a corner under Culp’s leadership, a story comes out that could torpedo General Electric stock.

Failure to Disclose

“A joint Toronto Star/CBC investigation has found that for the past 15 years, GE has quietly paid to remove the hazardous material from local houses – after selling asbestos collected from its shop floor to employees between the 1940s and 1974,” The Toronto Star reported on  Sept. 17. 

A GE spokesperson said, “The health and safety of our employees and the public is a top priority for GE. Since 2003, we have removed insulation with asbestos containing material derived from the Peterborough facility. We will continue work with the community and homeowners if additional material is found.”

So far, GE has paid to remove asbestos from 24 homes, the newspaper stated. However, asbestos could be in hundreds of houses in the town, according to Peterborough Councilman Keith Riel. If that’s true,  GE may have to foot the bill for millions of dollars of remediation work. 

That’s not a significant amount of money for GE stock.  However, from an optics point of view, it just stinks. 

In fairness to GE, if the asbestos remains untouched, it’s not a risk. The material generally only becomes a health issue if it’s moved. However, many ordinary household activities have a chance to disturb it, making it a potential danger at all times.

“The moral and ethical thing for GE to do would be to put out a real public health notification to the people they sold that stuff to about this danger, and about how they should deal with it, ” said Barry Castleman, a U.S.-based environmental consultant who has served as an expert witness about asbestos risks in about 24 American trials involving GE.

Between 1975 and 2019, according to Peterborough Public Health and the Workplace Safety and Insurance Board of Ontario, the province in which Peterborough is located,  there have been 685 disease claims by GE’s workers. Just 43% of those claims have been approved for compensation, the board reported. A similar number of claims has been denied, and the rest are either pending or have been withdrawn, it added. 

The cancer rate from asbestos in Peterborough is 40% higher than in the rest of Ontario.  indicating that GE’s alleged asbestos sales have had a meaningful, negative impact on the town’s health. 

In 2004, GE denied that it had ever sold asbestos to its employees. If  its former employees hadn’t found a 1956 GE newsletter that advertised that the company was selling 1,500 pounds of asbestos fluff each month, GE might not be in the situation in which it finds itself today. 

As one CBC reader quite rightly commented, “The entire town should sue the pants off GE. Lord knows they have enough skeletons in their closet. It’s about time they paid for it.”

The Bottom Line on General Electric Stock

Although Culp has done a good job righting the ship, investors should not own GE stock if they’re looking for a great investment. 

And after what I’ve read about how GE’s handled its asbestos problem, I can’t say I’d be very proud to admit I’m a shareholder of the company, either. 

Buy GE stock at your own peril.

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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