Gen Electric (NYSE:GE)
Historical Stock Chart
2 Months : From Apr 2019 to Jun 2019
By Thomas Gryta
Larry Culp, General Electric Co.'s chief executive, plans to set his sights on the company's problematic financial-services business after he cuts overall debt and stabilizes its power-generation division, he told investors Wednesday.
In a wide-ranging presentation at the Electrical Products Group conference, Mr. Culp reiterated GE's latest financial forecasts and discussed the steps he is taking to streamline its operations. "We are changing the way we run the business," he said. "From a business that was often run top-down...to a business that's going to be run from the bottom up."
GE has struggled the past two years -- losing $200 billion in market value over 2017 and 2018 -- with slumping profits in its power business and troubles in GE Capital, leading it to change CEOs, cut its dividend twice and set plans to break itself apart. Mr. Culp, who took the helm in October after six months on the board, has projected up to $2 billion in negative cash flow for 2019.
GE Capital has been a key part of the conglomerate's profit engine for decades, but it has also been the root of some of its recent problems and continues to be a concern for investors. The financial-services division ended 2018 with more than $109 billion in assets and $66 billion in debt.
When asked Wednesday how quickly GE can shrink the size of GE Capital, Mr. Culp said he expects to be in a better position to make decisions once GE's debt of more than $100 billion is reduced and the power division is "back on its feet." He said future cash contributions to the Capital unit would be "meaningfully less" than the $4 billion needed this year.
GE Capital brought the conglomerate to its knees during the financial crisis, and a swift sale of most of the business to get out from government oversight years later didn't jettison toxic remnants that have cost billions of dollars more recently. GE Capital has been shrinking, but it still has attractive parts such as its airplane-leasing business, Mr. Culp said. "Are they more valuable outside of GE, than as part of GE?," he said.
Regarding the power business, Mr. Culp said the division has cut 1,000 workers this year and is aiming to further reduce costs. The division had about 60,000 employees at the end of 2018. GE finance chief Jamie Miller recently said there would be additional restructuring in the power business in the second quarter and "in particular in the second half."
Mr. Culp said GE isn't banking on selling its products in China to turn around the power business. He also said cost pressures from tariffs in the continuing U.S.-China trade battle are manageable, but GE is more concerned about "the more-subtle repercussions" of relations with China. "Our health-care business in China for example got off to a very good start," he said, "but it is something we are watching very carefully."
Write to Thomas Gryta at firstname.lastname@example.org
(END) Dow Jones Newswires
May 22, 2019 16:24 ET (20:24 GMT)
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