Contrarian Value Ideas

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GE - >>> Larry Culp Cut Costs and Repaid Debt. That Helped GE Weather Today’s Storm.


By Al Root

June 27, 2020


https://www.barrons.com/articles/barrons-top-ceos-2020-general-electrics-lawrence-culp-jr-51593221128?siteid=yhoof2&yptr=yahoo


Larry Culp was hired to turn around an American icon, and the early evidence suggests he is succeeding. The first outsider brought in to run General Electric since its founding in 1892, he never expected to manage the company through a global pandemic and economic crisis. Then again, Culp, 57, is no stranger to calamity; he led Danaher successfully through 9/11 and its troubled aftermath. “What you want is a steady hand during a time of crisis,” he told Barron’s in a recent phone interview.

The company that Culp inherited two years ago had fallen on hard times after bad bets on insurance and power generation left it with more debt and less cash flow than was healthy. Acting quickly because, as he said, “time is rarely your friend,” he sold assets, paid down debt, and cut staff in GE’s largest division, GE Aviation. “It’s never pleasant,” said Culp, adding that he’s not betting on a rapid post-Covid-19 recovery to bail out the company. “It will be a multiyear journey.”

Culp’s bold action might have saved GE, especially considering this year’s challenges. The debt load is far more manageable today than when he took charge. And even though the stock has fallen during his tenure, Wall Street now talks about the shape of its aerospace recovery, not whether creditors might come calling.

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