GE GE Aerospace

By Thomas Gryta 

General Electric Co. Chief Executive Larry Culp said he expects asset sales to bring in about $38 billion in cash for the company as it begins paring down its large debt load, and there are signs the long-struggling power division is gaining strength.

Speaking at a Morgan Stanley investor conference Thursday, Mr. Culp also said falling interest rates will increase GE's pension benefits obligation by about $7 billion net of investment returns and its insurance reserve funding by less than $1.5 billion. Neither of the adjustments will require a cash contribution.

Mr. Culp, who took over as CEO almost a year ago, said 2019 is progressing as planned, with no major surprises. He said the company's power division is seeing some signs of stronger-than-expected demand this year that may continue into early 2020. But he warned that GE won't be running the business with that assumption in mind.

"We want to be optimistic, we want to be positive, but we want to be grounded," he said. GE in July raised its financial projections for the first time in years, citing positive signs in the power business and saying it wouldn't burn through as much cash as feared.

Mr. Culp said there is "plenty of wood to chop" in power, renewable energy and in the corporate organization, where he is cutting head count and costs, as well as improving day-to-day operations. "We know we have a lot more to do both with respect to the balance sheet and the way we run the business," he said.

Earlier Thursday, GE disclosed that it would pay down up to $5 billion in debt through a tender offer as it puts incoming cash to work. The company said it is also looking at other actions like pension funding and paying down loans from GE to its financial services division GE Capital.

GE has harvested cash from a number of moves aimed at paying down its more than $100 billion of debt. It sold its transportation business and airplane-finance operation and is in the process of selling its biotech business to Danaher Corp. for $21 billion. This week, GE began selling down its controlling stake in Baker Hughes, giving up its majority holding and getting net proceeds of about $2.7 billion. The sale will trigger a write-down of more than $7 billion because of the higher carrying value for the company.

The company's insurance operation is closely watched by investors as regulators required a commitment to boost reserves by $15 billion last year. GE is currently conducting an annual examination of its reserves.

Mr. Culp said GE is watching the effects of the U.S.'s trade battle with China, especially for its health-care division, along with the continued grounding of Boeing Co.'s 737 MAX jet that uses engines made by a GE joint venture. The company has previously said the grounding could drain as much as $1.4 billion from cash flow this year.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

September 12, 2019 15:20 ET (19:20 GMT)

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