General Electric (GE) CEO Larry Culp is celebrating his one-year mark atop the struggling industrial by making a bold claim to investors.
“All in, we expect significantly better results in 2020 and beyond, and we see an opportunity across each of our Industrial businesses to drive higher free cash flow margins over time,” Culp told GE Vice President Steve Winoker in a Q&A interview for his latest newsletter to investors and media on Tuesday.
GE’s stock fell 3.1% in early trading despite the claims amid a broader market selloff.
“Over the long term, as operational improvements take hold, I have confidence that our Industrial businesses in aggregate should yield cash on sales more than double last year’s levels,” Culp added.
Since assuming the mantle at GE a year ago after spending time as a board member, Culp has worked quickly to put into practice the lean manufacturing operating principles he successfully used as CEO at Danaher. That includes sweating the small operational details while at each factory visit (of which there have been many).
Meanwhile, Culp has also drilled down on GE’s bloated cost structure by letting go of underperformers. He has overhauled management and jettisoned businesses for sale, by his own admission, pay down GE’s still too high debt levels.
The financial results stemming from Culp’s extensive efforts have been mixed at best, underscoring the years of gross mismanagement under former CEO Jeff Immelt. Revenue and profits continue to be dreadful in GE’s all-important Power business. Free cash flow generation remains a problem, too.
GE’s stock has dropped 27% since the company named Culp as CEO, according to Yahoo Finance data. The Dow Jones Industrial Average and S&P 500 have each gained about 7% during that same span.
Culp and his team continue to downplay the claims made this summer by Bernie Madoff whistleblower — turn General Electric whistleblower —Harry Markopolos. Recall the forensic accountant said GE is committing financial fraud.