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00:00Why is this company as it now is more valuable in three parts than it was in one. Well David I think we've got a road map of the next two years to prove that out. But I think the board in the leadership team are firmly of the view that on three distinct bottoms these businesses will be more focused. They'll be higher greater level of accountability. We should have sharper capital allocation more strategic flexibility. And frankly he's can be good for the team as well. Right. The team that we have today certainly the team that will build over time. We all know that today's talent markets are more mission and purpose driven. We'll stand up to new boards full of strong directors with domain expertise. And I think we'll end up with investor bases focused on these pure plays investors that are probably under invested in G.E. today. You put all that together. It's clear this is the best path for us to unlock and create value going forward. Larry I suspect you've learned from bitter experience. I have that there's no such thing as a free lunch. You have to pay something to get anything. And obviously there are some benefits that will go through that you think you'll see. But are you giving up something in the so-called s word synergy. Because it was thought that General Electric did have some benefits for example and some of their research work that maybe research you did on new hydrogen powered turbines would help you in aviation. Are you going to give up some of that. David the G.E. teams heard from me for the last three years that I will bet on the benefits of focus every day far more than the often illusory benefits that come from synergies. Now we certainly enjoy those synergies today in certain places but more and more we've been running the company on a decentralized basis not as one G.E. not as even the four reporting segments but the 30 panels that deal with customers that compete in the markets every single day. So if there are synergies that we enjoy today will work to continue those of course. But the vast majority of the benefits here will come from focus. So that's why you're doing it why you're doing it now. What with the timing now. Why not a year ago two years ago or a year from now or two years from now. Well we've had a lot of work to do to take care of the balance sheet. We've reduced our debt load by over 75 billion over the last three years. We also needed to strengthen our core operations. If you look at what we'll do this year in terms of our adjusted free cash flow should come in around five billion dollars. I think those two proof points needed to be in hand before we could even entertain a question like this. It certainly helps being on the other side or increasingly on the other side of the pandemic. But also our customers want G.E. at its best focused on them whether it be our utility customers coming out of COP 26 dealing with the energy transition our air framers and our airline customers dealing with the post Covid recovery in that space let alone everything that's happening in precision health care. Now you're not doing all in one fell swoop as I understand. You go to some next year and then you put off some the year after. Why is it that with power as I understand you're going to put that off a little bit you're not ready to do that quite yet. Well we will take it in two steps. The first step will come in early 23 where we'll spin our healthcare business off. That's the business that's performing the best is probably the most ready to go. We'll take the time between now and early 24 when we spend our renewables and power businesses to improve their core operations and hopefully get a little bit more tailwind in that business again in the wake of all the climate initiatives that are out there today. I think I know you well know you thought about every possibility every permutation but take me through one of particular power and renewables. Not everybody is doing it that way. You could have gone the other way and say let's just have more traditional power business. Let's have the renewables. That's the new growth business. Why do you decide to put those two together. Well keep in mind David that we actually are putting three together because we're putting our digital business in with that group as well. The customer will always set you free. And I think in this instance our customers both in terms of the utilities and the power generators around the world but frankly also regulators and even legislators they want G.E. to bring a whole House solution. So whether it be onshore or offshore wind what we do in natural gas gas turbines in addition to the grid all or pieces of the puzzle all need to be brought to bear on this climate challenge. And keeping that together being able to integrate those solutions for customers really is I think the primary reason we want to go forward with these businesses together. What's going to happen. The General Eric name. What's going to happen with the logo. And then we all know it's been there forever. Who's going to get that. Well I think everybody wants to make sure they hang on to their they're part of the brand right. The monogram was recently order evaluated at nearly 20 billion dollars of brand value. It means a tremendous amount in each one of these markets. So we don't have a definitive brand plan today. We'll work through that as we will work through other questions in the months to come. But rest assured every business will share the G.E. heritage. So one way to put it what you're doing is unscrambling the omelets. You've got an awful lot of things to work out. The next two or three years no question about it but one thing that has been a significant factor for you and for general before you were there is this legacy sort of health care long term contracts. Where are those going to go. Those are long term care insurance. Businesses will stay with the core corporate entity which will be in effect G.E. aviation. So as we go forward G.E. is you know it today at a corporate level will spin health care will spin power. Renewables will retain aviation as well as our long term care insurance operation. In addition to some other liabilities. So what about the people involved. You have as you said you have three separate boards when you get done with all of this. Right. You have three separate CEOs which is understandable. What are you going to be doing in all this. Well when we get through the next couple of days and rolling this out we're all going to get back to work as we take the first step. David I will become the non-executive chair of the health care business. Really looking forward to welcoming Peter Sweeney who will be the new CEO of G.E. health care first of the year. We take the second step. We'll move the business out of G.E. and I'll stay with the business and leave the aviation focus g on a go forward basis. You have an executive there. They brought in very high profile very able one. I know you have a lot of respect for him. Is there enough there for the two of you to do. There's plenty for us to do today tomorrow over the next two years as we get ready for G.E. is aviation focused business. John Slattery was a terrific hire force last summer. We're thrilled with the job that he's doing. John will continue to be the CEO of G.E. Aviation and I'll lead from the corporate perch. So one of the questions that people are very pressed about on here particular ones in Boston are what about a corporate headquarters. I mean there was a big move to Boston. What happens with Covid headquarters. Where will these three companies be headquartered. David my office will continue to be in Boston for the foreseeable future in terms of the headquarter locations for the three discrete businesses. That's another decision that has not been taken just yet. One of the issues that comes up in these corporate structure things is multiples because you have multiple lines of business and they trade tend to trade at different levels of multiples. I know you're not a big fan of looking at it that way but it is one way that the street does look at it you different multiples. How much of that was a factor in either directly or indirectly because multiples reflect something else. Sure. Well I don't think that this is a decision taken at all by the board's desire to chase a multiple here or there. But we do know there were underground right. Investors who are keen to invest in aviation and health care and energy are under invested energy today despite the leadership positions we enjoy in those three markets. So I think over time we get that type of ownership the valuations of the businesses we'll take care of themselves. So once you get a little philosophical with me here if you would number one could somebody from inside G.E. have done this deal or was it helpful to you that you came. I mean I know you're on the board before but still you were a downer. You were not a G.E. person. Could somebody who'd spent their entire career g have made this decision because it's painful for some people a GSM because it's a very different conception of the company while the G E person. David today I'm sitting here. I think this was a decision that was a complicated one but not one I made alone. Right. I think a lot of people both in the boardroom and amongst the management team came together looking forward not backward and concluded this was the best way for these businesses to move forward in 2021. So just the two of us talking is always paying attention right now. When you came in a little over three and a half years ago G.E. was a fixer upper. I think it's fair to say it was a struggling company. At least that's the way many building outside perceived it. Did you always have this in the back of your mind if not as plan A as one of the plans you were thinking about. I wouldn't say that we really had a long term plan back in the fall of 2018 beyond fixing the balance sheet. Again this deleveraging that we're well along with as well as getting back to basics operationally we knew we needed to do a better job day in day out with the businesses. If we took care of those two priorities we knew we would have strategic options down the road. And I guess you could say today we're down that road a bit and hence the announcement we made this morning in part because you needed the cash you needed to reduce the debt level and you got some cash ISE of G cash and things like that right. Exactly right. And part of what we're announcing today is that as we move forward all three of these businesses will be investment grade rated companies. The rating agencies have come out here this morning confirm that the meetings we had with them recently I think were quite positive reinforcing the view. This is the best way for these businesses to go forward. OK. Now the navel gazing part of the interview that we always do in financial television. Right. Which is the future of conglomerates. I mean I must say just from my experience I've seen it and it goes up and it goes down over time. The hot new thing we all want to be a conglomerate that nobody wants to be a conglomerate. Does this say anything more generally about. Putting together different lines of business in a large corporation. David I'm going to leave that question to my colleagues at the Harvard Business School and and others. It's ultimately about performance right. I've been in companies where we did a number of things under one roof. So I've seen it from a number of different angles. But ultimately it's all about looking forward and being in a position to perform. And I think for G.E. today on three separate bottoms we'll be at our best. You can't sit here today and know exactly what it's going to look like in three years because there are all sorts of things that are unexpected in the development and I respect that. But overall do you have a hunch about the size of the employee base at this new company and the three companies. Will it go up or go down. Do you think it's moving by the same. Well I think we're going to grow from here. So even while we continue to drive productivity improvements I'd be surprised if we didn't have a bigger team on the field three years from now.

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GE Breakup Will Attract More Pure-Play Investors: CEO Culp

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