GE ‘s Upbeat Cash View Clashes With CEO Pay Deal
By Editor - Wed Sep 16, 3:33 pm
(Bloomberg Opinion) — In his nearly two full years as General Electric Co.’s chief executive officer, Larry Culp has made a habit of setting the bar low enough (some might say basement level) that he can still find ways to surprise investors with what at least feels like good news as he tries to steer the lumbering industrial giant toward a recovery. That pattern played out again on Wednesday when Culp, speaking at a virtual Morgan Stanley confidence, said that GE would generate positive free cash flow in the second half of 2020.As I noted back in July, it made sense that this might be the case, given the typical back-end weighting of GE’s cash-flow performance and the company’s aggressive cost cuts in response to the coronavirus pandemic. GE had just gone through “only” $2.1 billion of cash in the three months ended in June, compared with an earlier forecast for at least $3.5 billion of cash burn and maybe as much as $4.5 billion. But try as they might — and believe me, they tried — analysts on the company’s July earnings call just couldn’t get Culp to commit to a positive cash-flow number in the second half. He would only say that there would likely be an “improvement.” That reticence is a big reason why GE shares sold off more than 4% on earnings day. In the current environment, it’s hard to blame Culp for being conservative. Everything we thought we knew about our day-to-day lives has been turned completely upside down by the coronavirus pandemic. This is especially true for the aviation division that drives the bulk of GE’s cash flow.
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