By Christopher Hinton

General Electric Co.'s (GE) troubled industrial and financial businesses are leading to a credit-rating cut, which will likely force the conglomerate to reduce its dividend, JPMorgan said Friday.

But until the Fairfield, Conn., company lowers its dividend, it will be near impossible for it to restructure with a possible spin-off of GE Capital, according to analyst Stephen Tusa said in a note to investors.

"These events are necessary catalysts of change for a culture that was built to manage earnings in a way that is clearly unsustainable over the long term," Tusa wrote. "The bottom line is that, with deteriorating fundamentals - clearly at [GE Capital] and with industrial following - staying the course is a hurdle to capitulation."

Adding, "Former [Chief Executive Jack] Welch built a culture of earnings management that was unsustainable."

No one from GE was available to comment.

Tusa's analysis follow General Electric's bruising fourth-quarter results posted two weeks ago, showing a 44% drop in its net earnings on declines in its financial and consumer-product businesses. That trend is expected to continue through 2009, and the company said it would bulk up its cash reserve to weather the challenge. .

GE is a member of the Dow 30 and is considered a bellwether for the economy.

After falling earlier, GE shares on Friday posted a 3.5% gain to $11.23. Since mid-September, the stock is off nearly 60% and is trading at a 13-year low. Some analysts have said a slash to its annual dividend has already been priced in.

JPMorgan maintained its neutral rating for GE stock, but lowered its price target to $9 from $13, predicting double-digit earnings decline through 2010 with a profit trough that year of 70 cents a share.

Analysts polled by FactSet Research are looking for 2010 earnings of $1.30 a share, on average.

GE isn't the only member of the Dow Jones Industrial Average where investors are nervous over the dividend. Pharmaceutical giant Pfizer Corp. (PFE), Caterpillar Inc. (CAT), American Express Co. (AXP), and Alcoa Inc. (AA), are all under the microscope. Citigroup Inc. (C), Bank of America (BAC) and General Motors Corp. (GM) have already reduced their dividends.

Elsewhere, GE Chairman and Chief Executive Jeff Immelt has been included in President Barack Obama's new Economic Recovery Advisory Board, headed by former Federal Reserve Chairman Paul Volcker.

The board also includes Caterpillar Inc. (CAT) CEO James Owens.

-Christopher Hinton; 415-439-6400; AskNewswires@dowjones.com