The crisis at a Japanese nuclear plant that uses General Electric Co built reactors following last week's disastrous earthquake and tsunami is a reputational black eye that could badly hurt its efforts to grow its nuclear business.

But the largest US conglomerate does not face much direct legal risk due to Japanese laws channeling liability to plant operators and the government, rather than equipment suppliers, and a drop in demand for nuclear reactors could boost demand for gas turbines, coal plants and other GE-made equipment.

"You do have reputational damage any time you have a company like GE associated with a massive disaster, a nuclear incident, that is a terrible thing. But from a strict liability perspective, the issues are extremely limited," said Steven Winoker, an analyst at Bernstein Research.

GE wholly built one of the six reactors at the Fukushima Daiichi power plant that has been in a state of crisis since being hit by a massive earthquake and tsunami last week, and it built two others jointly with Toshiba Corp. Toshiba built two on its own and Hitachi Ltd built one.

Failures at the plant sent low levels of radiation 150 miles (241.4 km) south to Tokyo this week, triggering shock across the population and prompting the head of Russia's state nuclear corporation to say a "worst case scenario" was approaching.

"This is an incredibly fluid situation," said James Acton, associate in the Nuclear Policy Program at the Carnegie Endowment for International Peace. "The plant is so far beyond what it was designed to do. The only thing predictable is the unpredictability of all this."





Design criticized

The design of the GE-built reactor, and particularly the Mark I containment unit that is supposedly designed to ensure that radioactive material did not escape, has drawn criticism.

One unusual characteristic of the Fukushima facility involves the spent fuel pools -- where fuel rods are held to cool down after they are moved from the reactor but before they are sent to long-term storage. At the Fukushima site, the fuel pools stand over the the reactors, which means there is a possibility they can spill radioactive material onto the reactors if there is a major accident, one expert said.

"It was done for convenience at a time 40 years ago when convenience as a design criteria was more significant than the safety issues," said Robin Grimes, head of the center for nuclear engineering at Imperial College in London. "It's the only reactor built in that way that I know of. It was a poor decision and we are living with the results of that poor decision. It's a really odd design."

Former GE engineer David Bridenbaugh, who resigned 35 years ago over concerns that the containment system was not strong enough, this week told reporters it had "not been designed to withstand the loads" of a large-scale accident.

Still, he acknowledged that Friday's magnitude 9 earthquake and tsunami went beyond the risks engineers had anticipated.

"I feel sorry for the guys over there trying to handle that thing," said Bridenbaugh, who is now retired, said in a phone interview on Tuesday.

"On the other hand you can't say the Fukushima situation is a direct result of the Mark 1 containment. It is a direct result of the earthquake, tsunami and the fact the Mark 1 containment is less forgiving than some of the other reactor versions."

GE's competitors in the nuclear industry include France's Areva, Toshiba and Mitsubishi Heavy Industries.





GE says has modified design

For its part GE, which has installed 90 nuclear reactors worldwide and is also the world's largest maker of electric turbines and jet engines, said it has updated existing reactors to improve their safety.

"Over the past four decades, the Mark I has been modified in the form of retrofits to address technology improvements and changing regulatory requirements," GE said in a statement on its GEReports.com Web site.

Sixteen nuclear power plants in the United States operate reactors with a similar containment system.

GE shares have lost 5% of their value since the quake, amid a broad drop driven by investor worry over the Japan situation.

Some GE analysts and shareholders described the selling as overdone, given that GE's nuclear business -- which is now housed in a joint venture with Hitachi, represents a small part of its portfolio.

The GE-Hitachi nuclear joint venture generates about USD 1 billion in annual revenue through maintenance on existing plants and fuel sales. GE has not built a new nuclear power plant in more than a decade -- indeed one reason it joined forces with Hitachi in 2007 was because Hitachi had more current experience in plant construction.