GE's Larry Culp Talks About His First Drama-Filled Year as CEO
BY Dow Jones & Company, Inc.
— 8:22 PM ET 10/04/2019 https://www.barrons.com/articles/ges-larry-culp-talks-about-his-first-drama-filled-year-as-ceo-51570234975
Barron's recently chatted with General Electric (GE) CEO Larry Culp on his first anniversary at the iconic company. He has experienced lots of drama in that time. Stock swings, negative research, and events like the grounding of Boeing's 737 MAX pounded shares almost 22%.
Through it all, Culp has preached two things in what he calls GE's "reset year": debt reduction and operational excellence. He has unloaded billions of dollars in asset sales and, while he hedges a bit, says leverage targets will be met -- "You never want to neglect your balance sheet."
For instance, investors fear problems in GE's long-term care insurance unit. GE committed $15 billion in cash early in 2018 to shore up insurance reserves, and tried to demystify insurance after a report challenged its accounting. " These are long-dated obligations that play out over time," he says. "Another catch-up like 2018 isn't likely."
Less obvious are changes to the operating culture. Culp argues that huge changes are under way -- even if the challenges are very different from those at Danaher (DHR) , which he ran from 2000 to 2014. "We were refining the Danaher (DHR) business system we learned from our friends at Toyota," he says. "That's not what GE spent the past 11 years doing. One of the pleasant surprises is the flood of people wanting to use lean like we did at Danaher (DHR)."
Culp stresses the positives of the past year. "There are a number of thoughtful long-term investors in the stock now that see value in $375 billion in backlog with half of sales generated in the aftermarket." His new goals? "What I'm hopeful [about] is we will continue to demonstrate progress. This is a game of inches."