TODAY’S GENERAL ELECTRIC – INDUSTRIAL SECTOR

We’ve talked in previous posts about the challenges facing General Electric (GE) this year.

The good news is that the company has recently posted another quarter of profits (“weak profits” according to the WSJ – but profits are profits, in my view).  CEO Larry Culp took over the position in October, 2018 and has warned consistently that fixing the power company after a decade of neglect and mismanagement would take some time.  Therefore, I’d say that it’s good news that the company is beginning to swing around and, according to Culp, “2019 is still very much a work in progress but the company is becoming stronger.”  He cautioned that GE’s cash flow in 2019 would be impacted by the restructuring changes related to its power business, investments in its health care spinoff and other one-time items of change management.  These are how the various segments at GE break-out at the present time: Renewable Energy is up 28% from last year; Transportation up 24%; Aviation up 21%; Oil and Gas up 8% and Healthcare up 2%.  The losses are confined to the Lighting unit (down 16%) and Power (down 25%).  Culp has indicated that the company plans to reduce its leverage by $50 billion by both selling off its transportation division and selling down its stake in oil services, as well as in the initial public offering of its health care business.  And, contrary to external pressure for the sale of GE’s plane leasing service, Culp said that there were no plans to do so.  The company plans on contributing $4 billion to GE Capital this year as well as paying $1.5 million to settle a Justice Department’s investigation into a defunct subprime mortgage business, WMC.  And, GE’s Finance Chief, Jamie Miller, has said that GE still plans on paying $2 billion into reserves this year.  During an investors’ conference call, Culp said that the overall goals for the company were to attain a single-A credit rating and return to a dividend payment “in line with peers over time.”  Sounds like the company has rather quickly made it back into the realm of doing business as usual.  Without a doubt, there will still be bumps ahead but Culp’s change management expertise, to date, appears to bode well for the continued successful dealings with future challenges.

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