GE’s Reset Leaves Fewer Places to Hide
A mammoth jet-leasing deal caps the unwinding of GE Capital and will create a simpler structure with less room to hide bad news – for better or worse.
GE CEO Larry Culp just took his biggest step yet in leading the company’s turnaround.
Photographer: John Tlumacki/The Boston Globe via Getty Images
When Larry Culp took over as General Electric Co.’s CEO in 2018, investors were clamoring for the industrial giant to quit obfuscating earnings numbers and to unwind the complex financial arm that was still prone to unwelcome surprises. It’s been a slow, punishing grind at times, with an unhelpful industrial recession and global pandemic along the way. There has been plenty of incremental — but not game-changing — progress as Culp worked to clean up the bloated balance sheet through asset sales and to stanch the bleeding in the company’s beleaguered power unit. But on Wednesday, about two-and-a-half years into the job, Culp finally gave investors a true reset.
GE announced that it is merging the company’s GECAS jet-lessor business with rival AerCap Holdings NV in exchange for $24 billion in cash, a 46% stake in the combined company and $1 billion in notes or additional cash. GE will use the proceeds and existing cash to pay down $30 billion of debt. It’s a substantial enough chunk that the company’s leverage will no longer dominate the narrative around the stock and Culp can at least start thinking about what the GE of the future should look like rather than spending all his time fixing the problems of GE’s past. But perhaps most important, the divestiture will allow GE to take a big step toward unwinding GE Capital. This is a business that has threatened to topple the company not once but twice and whose murky relationship with the core industrial machinery operations has sparked years of debate about how real the reported numbers are for those units and the extent to which they are propped up by internal transactions.