GE head: 2019 a ‘reset’ year
With its CEO describing 2019 as a “reset” year, General Electric said Thursday it expects to absorb two more years of losses from its GE Capital division based in Norwalk, before hitting breakeven as insurance losses ebb and it finds buyers for some of GE Capital’s portfolio of loans.
GE gave investors an update on Thursday of its business outlook for 2019 and beyond, with shares up 4 percent as of mid-morning to $10.40. The company has scheduled its general shareholder annual meeting for May 8 in Tarrytown, N.Y., less than an hour from its former headquarters office in Fairfield.
On Thursday, GE reported it slashed roughly 10,000 corporate jobs last year through the sale of businesses and internal moves, with the company promising “more actions underway” on Thursday as it looks to strip $500 million out of its net corporate costs by the year 2021. The company expects to spend $2.4 billion this year on restructuring actions, without stating any overall impact on jobs it may cut or transfer through divestments.
GE recently reneged on a pledge to build its Boston headquarters staff to 800 people after moving its main office there in 2016 in a relocation that had included Massachusetts incentives it has now turned away as a result of that decision.
The company’s shares got a boost last month after GE announced the $21.4 billion sale of its GE BioPharma unit to Danaher, whose former CEO Larry Culp Jr. was installed last October as CEO of GE. Shares had dropped since, however, closing at $9.11 on March
6, and having traded as low as
$6.66 last December.
“We do not need any convincing that we can and should be better,” Culp said Thursday in a conference call with investors. “Simply put, we have too much debt and we need to reduce it thoughtfully and quickly.”
‘Serious turnaround mode’
At last report, GE had about 1,400 employees in Norwalk between GE Capital and corporate functions, including tax planners. The company declined last month to provide an update on how many people it employs in Norwalk.
GE expects its finance subsidiary to produce losses of between
$500 million and $800 million this year, and to near the break-even mark in 2020. By the following year, it expects GE Capital to be contributing profits again to the corporate parent on income from a portfolio of financial assets expected to be valued between
$103 billion and $105 billion, versus $109 billion entering this year.
Mitsubishi UFJ Financial Group reached a deal in January to acquire GE Capital’s supply chain finance business, which runs an accelerated payment program that suppliers can use to have their customers pay off their invoices ahead of due dates in exchange for discounts. The companies
did not disclose financial terms of the deal, which could be complicated depending on the willingness of some of those customers to make the transition to MUFG which has its main U.S. office in New York City.
“We (have) ... some expectation on leakage,” said Jamie Miller, chief financial officer of GE, speaking Thursday. “As suppliers transition, participation rates could change — they could opt out of the program.”
GE’s power business remains “in a serious turnaround mode” as Culp put it Thursday, including the utility grid businesses GE acquired from Alstom in 2015, in a deal engineered by former CEO Jeff Immelt. Culp likened to “inheritance taxes” the business liabilities GE took on in the deal
like pension costs, legal liabilities and costs to undertake upcoming project commitments.
“This is not going to be quick by any stretch,” Culp said. “We were slow to embrace market realities and as a result, we were slow to address our cost structure.”
Separately on Thursday, the head of GE Aviation referenced the Ethiopian Airlines crash last week that has led to a worldwide grounding of Boeing 737 Max 8 jets that use engines from GE Aviation’s CFM International joint venture with Safran. Investigators have focused attention on whether the aircraft’s software had any role in putting the aircraft into a downward descent, and whether pilots attempted to counter that descent.
“There is no more important
imperative than getting to root cause and corrective action for the flying public,” said GE Aviation CEO David Joyce on Thursday. “Their confidence in the safety of flight is the foundation of our entire industry, and we all take that responsibility as paramount.”
GE Aviation recently won a U.S. Department of Defense competition to design the newest iteration of engines for Black Hawk utility helicopters built by the Stratfordbased Sikorsky Aircraft subsidiary of Lockheed Martin and Boeing AH-64 Apache combat helicopters, with GE contemplating orders of as much as $20 billion as a result of the contract.