August 5, 2019 BARRON’S 11
A Return Visit to Earlier Stories
Grading GE’s Turnaround Plan
GENERAL ELECTRIC CEO LARRY CULP IS
making progress revitalizing the iconic
U.S. manufacturer (“How New CEO
Larry Culp Can Turn GE Around,”
Nov.30, 2018). The company reported
second-quarter earnings this past
Wednesday,andmanagementincreased
itsfull-year2019earningsandcash-flow
guidance, beating Street expectations.
Since our story first appeared, GE
stock (ticker: GE) is up 39%, compared
withtheDowJonesIndustrialAverage’s
5.2% gain. That makes this a good time
to grade Culp on our original sugges-
tions:Fix GECapital ,sellpartofhealth
care, change the corporate culture, and
minimize large deals.
Since taking over, Culp has empha-
sizedtwobigthings:shrinkingGECapi-
talandstrengtheningoperations.Thefi-
nance division ended the quarter with
$109billioninassets,downfrom$128bil-
lion when Culp took over in September.
GEalsoplanstoreducedebtfurtherasit
completes more asset sales.
The largest asset sale under Culp’s
leadershipwasGEBiopharma,partofits
health-caredivision.Thedealwilldeliver
another $20 billion of cash to GE.
Gradingculturechangeisharderthan,
say,calculatingbenefitsfromcost-cutting.
But Culp is pushing hard to integrate
leanmanufacturingtechniques,whichem-
phasize continuous quality improvement
andcostreduction,acrosstheentireGE
organization.
Atthispoint,GEisstillsellingassets
and not buying new ones. Any M&A
grade would be incomplete. But since
Culp became CEO, GE took the painful
stepofwritingoffits2016Alstompower
acquisition, part of a $21 billion charge.
Culp was on the GE board before he
wasCEO.“It’sdifferentdaytodaythan
intheboardroom,”hetold Barron’s, add-
ing,“I’mencouragedbythe[low]number
ofmaterialsurprisesinthe10monthsI’ve
been here.” No internal surprises are a
good thing, especially since the market-
placehasdealthimafewcurveballs,such
as China and Boeing (BA).
The specter of new Chinese power-
turbine competition has weighed on GE
stocksince Siemens (SIE.Germany)CEO
Joe Kaeser commented in May that the
Chinese may want to sell their own tur-
bines around the globe. Culp recently
spent two weeks in China meeting with
businesspartners.“Nothinghaschanged
in China” regarding the near-term and
long-term industry outlook, he reports.
And then there’s the trade war.
“China trade tensions are real and may
heighten before they dissipate,” Culp
says. It has been difficult for industrial
CEOs to predict the path of the U.S.-
Chinese trade dispute. Most, including
Culp, remain focused on controlling
things that can be controlled—like
tariff-linked cost inflation—and hoping
for a favorable, speedy resolution.
Boeingisalargerissue.GEmakes
MAX Leap engines for Boeing with its
partner Safran (SAF.France). The 737
MAXjetisstillgrounded,andGEfound
a problem when testing new engines for
thelatest777planes,forwhichGEmakes
the powerful GE9X engines.
“I’m not concerned about the 9X
development,” Culp told Barron’s .“We
found a wear problem during testing.”
Thepartredesigniscomplete,testingwill
resume in coming months, and Boeing
should have a “safety in flight” letter by
December, he says.
It’sstillearly,ofcourse.“Idon’tknow
ifwe’reinthebottomofthesecondinning
at this point,” Culp says. Still, he adds,
“We’remakingsteadyprogress.”Itlooks
that way to us, too. —ALROOT
GE CEO Larry Culp
Courtesy of GE
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