In this podcast, Kristina Hooper discusses the likelihood of a soft landing after hotter-than-expected ISM services data. Niall Ferguson warns of catastrophic effects without swift regulation of artificial intelligence. Peter Stavros and Kathy Bolhous talk about the benefits of employee ownership. Larry Culp explains his priorities in turning GE around and his future plans for the company.
Larry Culp successfully led GE's turnaround by addressing debt and improving daily operations.
GE's aerospace business has a positive outlook for post-pandemic recovery and sustainable growth.
GE's repositioning allows for strategic capital allocation and potential small to mid-sized M&A deals.
Board support and a strong leadership team were crucial in driving GE's positive transformation.
Lessons from GE's turnaround emphasize the importance of debt management, strong leadership, and customer focus.
GE's three independent businesses have opportunities for organic growth, tailored capital allocation, and industry leadership.
Deep dives
Larry Culp takes over as CEO of GE
Larry Culp became CEO of General Electric in October 2018, with his main priorities being to address the company's massive debt and improve daily operations. Culp focused on deleveraging and selling off parts of the business, such as the healthcare unit. He also dove deep into understanding the operations and making improvements at all levels, reducing waste and improving profitability and cash flows. Despite unexpected challenges like the Boeing 737 MAX grounding and the COVID-19 pandemic, Culp led GE to a better position both financially and operationally.
GE's aerospace business sets for post-pandemic recovery
GE's aerospace business has an optimistic outlook for the post-pandemic recovery. The return to flight and the need to modernize and expand fleets are driving growth opportunities in the commercial aviation sector, resulting in strong order backlogs. GE's defense business has also seen a significant uptick in demand. The company's focus on propulsion and its position as an industry leader are expected to enable sustained growth in the mid to high single digits, making it an enviable aerospace business going forward.
Capital allocation post-restructuring
As GE completes its restructuring efforts and becomes a company focused on healthcare, power, and aerospace, it will have more freedom for capital allocation. The company aims to be well-capitalized and investment grade. While organic options are a priority, GE may consider small to mid-sized M&A deals, but not large acquisitions. Each of the three businesses will have tailored, balanced capital allocation policies, potentially including buybacks and dividends.
Importance of board support and leadership team
Throughout GE's turnaround journey, board support and a strong leadership team were crucial. The board had a shared focus on deleveraging and improving daily operations. They worked alongside the management team to understand the challenges and opportunities in the company. The board's commitment and willingness to run toward the fire helped drive positive change. GE's leadership team, under Larry Culp's guidance, ensured a deep understanding of the company's operations, identified areas for improvement, and implemented a lean operating model.
Lessons from GE's turnaround
GE's turnaround under Larry Culp offers valuable lessons in managing a company facing financial and operational challenges. Key takeaways include the importance of addressing debt burdens and improving daily operations, the value of a strong leadership team, the need for strategic flexibility, and the focus on serving customers effectively. GE's transformation demonstrates the potential for a once struggling company to regain strength and resilience.
The impact of extreme weather events
The summer of extreme weather events, including heatwaves, wildfires, hurricanes, and typhoons, highlights the urgent need to address climate change. While individual weather events cannot be directly attributed to climate change, the increase in the frequency and intensity of extreme weather is linked to a warming planet. These events pose significant risks and require collective action to mitigate and adapt to their impact.
Burning Man's encounter with extreme weather promotes resilience
Burning Man, an annual event celebrating art and self-expression in the Nevada desert, faced extreme weather events during its 2021 edition. Despite the challenges, participants embraced the opportunity to practice radical self-reliance and support each other in the face of adversity. The experience highlighted the importance of resilience and community support in the face of nature's unpredictability.
The wisdom of looking deeply into nature
Albert Einstein's quote urging us to look deeply into nature resonates in today's world of extreme weather events and climate change. By understanding nature more deeply, we can gain insights into the consequences of our actions and make informed decisions about protecting the environment. The challenges posed by extreme weather call for a greater focus on sustainability and a shared commitment to preserving our planet for future generations.
The perseverance of GE's turnaround offers hope
GE's successful turnaround under Larry Culp's leadership serves as a source of hope and inspiration for struggling companies. By addressing debt, improving operations, and repositioning the business, GE was able to restore its financial stability and position itself for future growth. The lessons learned from GE's transformation highlight the importance of resilience, strategic decision-making, and a customer-centric approach in navigating difficult times.
The role of size versus strength in business
GE's repositioning under Larry Culp's leadership highlights the importance of focusing on strength rather than just size in business. While GE may no longer be the largest company, its three independent businesses are poised to excel in their respective industries. The emphasis on delivering value to customers, maintaining operational excellence, and maximizing shareholder returns positions GE for sustainable success.
Future opportunities for GE's businesses
With the completion of its restructuring, GE's three independent businesses have the opportunity to pursue organic growth, potential acquisitions, and the development of tailored capital allocation policies. While growth prospects in aerospace are particularly promising due to the post-pandemic recovery, GE's healthcare and power businesses will also have opportunities to thrive in their respective sectors. The focus on industry leadership and operational efficiency sets the stage for future success.
On this edition of Wall Street Week, Kristina Hooper, Invesco Chief Global Market Strategist dives into the likelihood of a soft landing after hotter-than-expected ISM services data. Niall Ferguson, Hoover Institution Senior Fellow warns of catastrophic effects without swift regulation of artificial intelligence. Peter Stavros, KKR Global Co-Head of Private Equity and Kathy Bolhous, Charter Next Generation CEO discuss the benefits of employee ownership and Larry Culp, GE Chairman & CEO explains his priorities in turning GE around and his future plans for the company.
