General Electric’s new CEO outlined his priorities on Tuesday, singling out the GE Power division as the embattled conglomerate posted a $22.8 billion quarterly loss and faced mounting legal problems.
Larry Culp said his first few weeks on the job since he replaced John Flattery on Oct. 1 had made clear to him that “GE is a fundamentally strong company with a talented team and great technology. However, our results are far from our full potential.”
Citing the need for a greater sense of urgency and increased accountability “across the organization to deliver better results,” he listed his immediate priorities as “positioning our businesses to win, starting with Power, and accelerating deleveraging.”
To boost GE’s balance sheet, Culp, who effected a turnaround when he was CEO of Danaher, said GE would take steps including slashing its quarterly dividend from $0.12 to $0.01 per share, which would allow the company to retain $3.9 billion of cash per year compared to the prior payout level.
“We are moving with speed to improve our financial position,” he said in a news release.
GE’s third-quarter report illustrated the hill Culp has to climb. The company posted a net loss of $2.62 per share, compared to a $0.15 per share profit a year ago, reflecting in part a goodwill impairment charge of $22.0 billion related to GE Power.
The struggling power business lost $631 million in the quarter. Culp said he would reorganize GE Power, combining gas turbine equipment and services businesses in a new unit and assigning the other assets to a second unit.
“They are acknowledging that [GE Power] is not going to turn around in a hurry,” Paul Healy, a Harvard Business School professor, told Reuters.
GE also disclosed in a regulatory filing Tuesday that the U.S. Securities and Exchange Commission had expanded an investigation of its accounting practices to include the power-related goodwill charge. The probe had already included GE’s revenue recognition practices and internal controls over financial reporting related to long-term service agreements.
“It’s going to be a cloud that overhangs the company until things get cleaned up,” Jeff Windau, an analyst at Edward Jones, told CNN.