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GE asks shareholders to bear with it during turnaround

GE asks shareholders to bear with it during turnaround

CEO Culp says company committed to improving performance, value
GE asks shareholders to bear with it during turnaround
Building 37 at the GE main plant in Schenectady is pictured.
Photographer: Marc Schultz/Gazette File Photo

TARRYTOWN — General Electric’s CEO sat down with the company’s owners Wednesday for the annual shareholder meeting, reiterating his frequent message of a company with a lot of strengths working hard to overcome some serious weaknesses. 

It was only the second such meeting for H. Lawrence Culp Jr., who joined GE’s board of directors shortly before the 2018 shareholder meeting and was named CEO in October.

That first shareholder meeting, coming amid a sustained nosedive in GE stock price, affected him greatly, he said Wednesday.

“I had no real appreciation for the disappointment — and I could use stronger words — that so many retirees, so many former employees and shareholders had, given what had happened to the company. But at the same time, the great passion, the great concern, dare I say the love, so many of you expressed in equal measure. ... That was certainly motivating for me.”

(The closing price per share Wednesday was down 27 percent from the close on the day of the 2018 meeting and down 65 percent from May 8, 2017.)

Culp said shareholders own a piece of a conglomerate with four core businesses, or “bricks” — Aviation, Healthcare, Power and Renewable Energy — as well as several other units that are like the mortar between those bricks: Capital, Digital, Additive, Global Growth Organization and Global Research.

He mentioned the Global Research Center in Niskayuna as important to the company’s future, fueling its innovation.

“I’m asked a lot, by friends and others, what’s GE like on the inside? And this is really the answer that hit me, very much in the first week, and it’s the source of my optimism about our future: First and foremost, we’re very fortunate to have an outstanding team. … Getting inside the Global Research Center, getting inside our businesses has allowed me to see our technology up close. And fortunately, we’ve been investing in technology at GE for decades and you can really see it. And we’re going to continue to be the technical leaders in our businesses, because that ultimately is the source of our competitive advantage.”

Culp mentioned the two other large GE components in the Capital Region: Renewables, which has several hundred employees at the Schenectady campus, where its onshore wind power unit is headquartered, and Power, which was formerly headquartered in Schenectady and still has a major manufacturing facility there.

“This will be a year of investment in Power as we reset that business for a new market reality, particularly with respect to gas turbine demand,” Culp said. GE Power has made a substantial investment of effort and strategy to boost its profitability, and is in the midst of a rapid cost-cutting, workforce-shrinking, facility-closing campaign that has reduced its Schenectady workforce by a reported 30 percent.

Wind power is the biggest component of Renewables, he said, noting that the business in 2018 led the U.S. market for onshore wind turbines and has more than 40,000 installed units worldwide.

In the broader picture, Culp said the company as a whole must:

  • Put the customer at the center of all that it does, and measure the company’s performance as a customer would, rather than by corporate metrics.
  • Become more operational, focusing on everyday results rather than quarterly reports.
  • Be smarter and sharper about its focus, determining what it must do today and what it must postpone to the future.

Culp reminded shareholders that GE makes the stuff of modern life: Its 283,000 employees (as of December 2018) in more than 180 countries work every day “to bring real progress and possibility to every corner of the planet. That is what we do. Companies may say they’re changing the world, but I’m sorry, a social media app really doesn’t, in many instances. But what we do does. … It’s what has fueled this company for well over a century.”

QUESTIONS

After his presentation, Culp fielded questions from shareholders, who on the whole seemed much more appreciative of him and his work than of the previous two CEOs.

Bill Freda, a critic at past meetings, spoke more supportively this time of the current company leadership and blamed former CEO Jeffrey Immelt for the company’s decline. Could the board claw back Immelt’s substantial pension benefits, he asked? Only if misconduct is uncovered, Culp answered, adding that business decisions which turned out poorly don't constitute misconduct.

Kevin Mahar of Lynn, Massachusetts, a GE retiree attending his 23rd straight shareholder meeting, seconded Freda’s remarks and added: “I know that Helen Quirini from Schenectady is looking down on us because she would have been here too.” (The longtime activist for GE retiree benefits died in 2010 at age 90.) Culp drew laughter when he replied: “Does anyone want to speak on the management proposals?”

Apparently not. A speaker who didn’t give her name said Culp hadn’t said anything to the “real losers” in the room, apparently referring to those who invested their lives in the company, citing “our love of this company, this history we have ... it is rich in Schenectady and we need to fix this — fast.” She also noted Culp didn’t address the causes of GE’s problems. There wasn’t time at the meeting to do that, Culp replied, but it boiled down to a confluence of factors that might be handled differently, could the process be replayed.

Ron Flowers, president of a GE Retirees Association in Erie, Pennsylvania, drilled in on GE’s decision four years ago to replace health insurance coverage with a retiree reimbursement account that he called wholly inadequate. “The lucky ones die early. The rest get sicker and sicker and they have costs that go higher and higher,” Flowers said, asking for an increase in the RRA. Culp said he understood the pressure and pain on retirees but “I just don’t see us coming back and revisiting that. I don’t want to raise expectations.”

Two speakers from the Tri State Coalition for Responsible Investment, a Catholic group advocating social justice and environmentally responsible corporate action, asked why GE continues to market new coal-fired power systems given their impact on the environment. Culp replied that GE is doing much to propel the transition to lower-impact power sources but wants to help drive progress and prosperity in parts of the world that continue to rely on coal for economic or regulatory reasons.

An investor asked why GE Power’s financial performance declined so steeply. Three reasons, Culp said: The gas turbine market slowed down, GE acquired Alstom’s power division just as demand its products tapered off, and Power had been managed from the top as one business rather than from the bottom as multiple businesses. Culp said he wants daily improvement at Power but is reluctant to set a timeline or financial target that might be unrealistic.

SHAREHOLDER VOTES

Also during Wednesday’s meeting, stock owners’ votes were tallied on five propositions. Appointment of an auditor, a reduction in the number of directors on the board, and non-binding approval of executive pay all passed, as recommended by the company.

Two proposals put forth by share owners — one blocking the CEO from serving as board chairman, the other allowing cumulative shareholder voting — were both rejected, as recommended by the company. The proposal to require that the chairman be an independent member of the board drew more than 27% of votes in favor while cumulative voting drew only 6% in favor.

The shareholders also elected the board members.

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