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If you follow General Electric (NYSE: GE) regularly, you've probably heard the big news from last week. An "oxidation issue" with a component in GE's new HA-class gas turbines has forced the shutdown of several turbines, according to GE Power CEO Russell Stokes.
This revelation was followed by subsequent reports that the oxidation issue may affect up to 75 turbines of an older model and that a power plant in France is shutting down a GE turbine for a month. As a result, GE stock has plunged more than 10% over the past five trading days.
GE Weekly Stock Performance, data by YCharts.
Yet this wasn't actually the biggest news related to GE to come out over the past week. The real story should have been that CFM -- a joint venture between GE Aviation and Safran -- is finally overcoming supply chain snafus and starting to reduce delivery delays to Boeing (NYSE: BA) and Airbus. However, investors seem to have completely missed this important development.
The turbine problem isn't such a big deal
Investors are likely exaggerating the importance of the oxidation issue. While it's an unfortunate setback for the already-struggling GE Power business, "teething" issues like this are not unusual for advanced technology. The long-term impact of such issues is usually minimal.
Luckily, the affected units represent a tiny fraction of the in-service fleet of GE gas turbines. Additionally, General Electric has already identified a fix and is working with its customers to get all of the affected turbines back into service.
This suggests the problem is not very complicated. The cost to address it should be far less than the roughly $10 billion investors have knocked off of GE's market cap in the past week.
The news nobody noticed
While most investors' attention was drawn to the circus surrounding this turbine issue, a trickle of good news about production rates at GE's CFM joint venture was overlooked.
CFM is the largest producer of engines for narrowbody jets. Image source: Boeing.
As I have noted before, GE Aviation generates far more profit and has much greater growth prospects than GE Power, making it worth dramatically more than its corporate sibling. That means threats to GE Aviation's growth should be of far more concern to investors than the ups and downs of the power business. Most recently, CFM's inability to ramp up output of its new LEAP-series engines in line with its production plan has been the biggest concern in this regard.
In late July and early August, Boeing was forced to park partially completed 737 MAX jets in every corner of Renton Municipal Airport (adjacent to its production facility) due to a shortage of LEAP engines.