Warren Buffett's firm is buying $3 billion US worth of GE preferred stock. (CBC)

General Electric, a giant lender astride shaky credit markets, has lined up a $3-billion US private investment from fabled investor Warren Buffett and hopes to build a cash cushion by selling $12 billion worth of stock to the public.

GE, whose factories make everything from jet engines to medical equipment, is also a major corporate and personal lender through its GE Capital unit. It cut its 2008 earnings forecast last week, blaming volatile financial markets that have cut the profits of the loan and lease business.

It announced Wednesday that Buffett's firm, Berkshire Hathaway, has agreed to buy $3 billion worth of GE preferred stock with a dividend rate of 10 per cent.

As part of the deal, Buffett gets warrants to buy $3 billion worth of GE common stock at $22.25 a share, not much below the current market price, any time in the next five years.

General Electric three-month chart (CBC)

The stock closed in New York at $24.50, down $1, after the announcement. It has moved between $42.15 and $22.16 in the past 52 weeks.

"GE is the symbol of American business to the world," Buffett said in a statement issued by GE.

"I have been a friend and admirer of GE and its leaders for decades. They have strong global brands and businesses with which I am quite familiar. I am confident that GE will continue to be successful in the years to come.”

GE chief executive Jeffrey Immelt said the deal brings two benefits.

"First, it enhances our flexibility and allows us to execute on our liquidity plan even faster. Second, it gives us the opportunity to play offence in this market should conditions allow."

GE is committed to retaining a triple-A credit rating, he said, adding that "in the recent market volatility, we continue to successfully meet our commercial paper needs."

Buffett, known to his fans as the Oracle of Omaha, last month provided a $5-billion cash infusion for Goldman Sachs, the big New York investment bank.

GE said Wednesday it hopes to sell at least $12 billion worth of common stock — and perhaps as much as $13.8 billion — at a price to be set Thursday morning.