Entering text into the input field will update the search result below

General Electric: A Distinct Lack Of Vision

Mar. 09, 2021 1:55 PM ETGeneral Electric Company (GE)174 Comments
John M. Mason profile picture
John M. Mason


  • General Electric seems to be completing a deal to sell off its aircraft leasing business to AerCap, for more than $30 billion.
  • Apparently, getting rid of Gecas, as it called, was not originally planned by CEO Larry Culp when he took over, but subsequent events have contributed to a willing sell.
  • More and more, it is apparent that Mr. Culp did not really have a vision for the future GE when he took over and has moved as opportunity has allowed.
  • This lack of vision apparently impacted shareholder interest in the company, causing GE's stock to meander lower as his tenure progressed, only reversing this trend recently.

Many of us have been waiting for GE CEO Larry Culp to “pull the string” on some new deals so that we can get a clearer picture of what he has in store for General Electric Co. (NYSE:GE) and some greater idea of his vision for the future of the company.

Well, GE is making a deal that is adding one further piece aimed at solving the problem about what General Electric is going to look like in the future.

The word is out that General Electric is nearing a deal to sell its aircraft leasing business to the Irish Group AerCap for more than $30 billion.

Larry Culp took over the top position at GE in October 2018. I applauded the move on the part of General Electric, but I was not much taken by the early performance of Mr. Culp.

Apparently, investors were not that impressed with his approach to the turnaround and restructuring of the company for much of his tenure.

In the middle of October 2018, the month Mr. Culp took over the leadership of the company, General Electric’s stock traded around $11.85. The stock price reached a recent low in September 2020 as the stock closed at $6.20 on Sept. 24.

The stock price really didn’t begin to rise until the end of October. The rise flattened out in mid-December, but began to improve again in the middle of February, rising to its current level of just over $14.00 per share, currently on the basis of improving profits.

Looks like investors are seeing something that they finally like coming out of the company.

The General Electric Legacy

Mr. Culp inherited a mishmash of a company that was the extreme picture of what conglomerate American companies looked like. I won’t say any more on this now, but a conglomerate

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (174)

John, man, wake up ! If you go back and really read GE's press releases and investor presentations since Culp became CEO, Culp has been very clear about what his strategy is both operationally and financially: simplify operations, focus on traditional strengths in manufacturing, improve the balance sheet, further isolate/contain the long tail Genworth risk, and more. It's going on right in front of your eyes! The sale of GECAS is a good move in line with Culp's strategy of operational and financial simplification: get out of a "non-strategic" business, use the freed up capital to further strengthen the balance sheet or invest in core businesses, and ergo, improve long-term return for shareholders. It is still not too late to buy GE shares and I would encourage you to at least take a small position here. Don't wait til the stock is $20 to finally see the light about what is going on this very positive turnaround story. And to top it off, Steve Tusa still has a neutral rating on the stock. When he finally wakes up and is forced to go to a buy rating, that will add further fuel to the upside. Yes, I am long GE.
@truckster , Are you implying that Culp is better than Two Jet Jeff and Welch were?
Sighcopath profile picture
Actually I might go on a GE buying streak if GE ever goes on a buying spree rather than a fire sale spree. Good companies buy other companies to try and integrate the business model. GE sale of the airplane business, based on it being part of the financial arm, ignores the fact that GE has a major part of its business in manufacturing airplane engines. Would be an interesting exercise to find out the percentage of the jet engines involved in this sale had engines manufactured by GE. If GE is no longer going to be buying airplanes for the airplane leasing business will the airplane manufacturers be as inclined to install GE engines on new planes?
wizwor profile picture
@Sighcopath If you do not know that GE aircraft engines are the best in the world, then you probably ought not be investing in companies that build aircraft engines.
Your criticism of Larry Culp is so far off the mark. Larry Culp has no vision or plan? Are you kidding me? Have you paid any attention? I don't even know where to begin. So I won't. You comments are comparable to Joe Biden's BS that Trump had no Covid-19 plan.
@DeZe100 ,What IS Culp's vision or plan? I have not heard announce ANYTHING. I have seen him sell off many parts of GE. Nice if he would announce what his plan actually is.
@G. Blair Bauer Have you listened to his and GE's presentations? If you did, and didn't understand the plan, then you should be in another business. Plan is in progress and producing results.
@DeZe100 What i have heard is Culp say one thing and then SELL another asset.
JAVAR profile picture
Reverse splits are a means to raise cash at 8 times the SP... or at least 6.5 . No other reason. GE just screwed shareholders, again.
@JAVAR I am not in favor of the planned reverse split. I don't understand the benefit (there is none). I have never heard of a reverse split to raise cash. I have seen reverse splits when a company needs to raise its stock price to meet minimum exchange required price levels. So, explain to me how reverse splits are used to raise cash.
@DeZe100 I don’t know why it would raise cash either. I’d think it was to reduce the available shares and better control the stock price. Also it would reduce the possibility of hostile intervention at a time in which the company is restructuring. One less headache.
Upbeat profile picture
If you don't think he has a plan that is only because you don't know what his plan is even as he executes it.
@WisPokerGuy same thing here I think! I own the stock & sell the covered calls out of the money every month. Is that what you mean by rolling the calls?
Reverse splits are not necessarily bad, it depends on what happens with the stock price and dividends subsequently. I have held three such securities. One ( nucor) has been very successful, one went bankrupt and the third, which I still own, has done better since the reverse split.
In GE’s case, one can easily understand that instead of using any or all of the cash from the GCAS sale( or whatever it is since GE retains a large number of shares in the new company) to buy back stock, h it can be used to strengthen the balance sheet or other reasons. Personally I really don’t think much of stock buy back strategies, a one time special dividend in my opinion would be more of a benefit if a company believes it has excess cash that can’t be used for growth or productivity increase. How the management actions benefit the stockholders remains to be seen. Perhaps the new orders for 737maxs , the vaccines and the gigantic government stimulus have convinced management that 2021 will be much better than was envisioned. Timing is everything. We shall see.
Tack profile picture
It's amazing to me that investors and commenters are treating this reverse split talk as if it were some indication of distress. It has utterly no commonality with the splits that distressed companies make to retain listings or keep prices above minimum purchase levels of some funds. This split is simply to return GE's total shares to a level consistent with other firms of similar valuation.

Lost in all this hysteria is that GE just reconfirmed their free cash flow forecast for the year and landed a huge new contract. This panicky dip has presented a veritable candy-store opportunity with options, as put premiums have zoomed higher and long-dated calls are on sale. The risk/reward equation appears very attractive for staking out contrarian long positions.
diadochi profile picture
@Tack That's the tack I'm taking. 😎 I bought the last two dips, thinking that really nothing's changed, and GE has been very strong in the last couple months, based on just the reopening of the economy, and the reflation of aviation. Go look at Boeing stock if you have any doubts about that.
Are they purposefully trying to crater their stock? It kinda looks like it.
SilverSpoon54 profile picture
What many are missing on the GECAS deal is that GE will retain 46% stock ownership. Instead of paying interest on 40B, they retire that cost impediment and have 25+B in stock that GE can unwind when needed. Brilliant strategy in my book. GE retains the maintenance on those engines in the fleet well into the future.
@SilverSpoon54 That is my sentiment but I do not believe the retail investor understands the benefit to both GE and AerCap. The entire focus seems to be on the reverse split - which technically speaking is a non-event - your equity remains the same and GE begins to look more like its industrial peers which is good.
A careful analysis of the ongoing eight for one reverse stock split and the sale to Aercap makes sense. Larry Culp is an extraordinary CEO with decades of experience. If your already a shareholder and bought in when the stock was 6.00 plus you did well. Hold on, it won’t be long before the dividend is restored and the stock rises as the economy returns to normal. All value investors know when you buy a dollar for forty cents as Ben Graham taught you will do well.
@DLSheeler Right…cause everyone wants to buy a stock that is doing a reverse split. I mean reverse split stocks have such a great history of performance.
ContrarianSurfer profile picture
@Clthokie lol a reverse stock split for a company that is doing wel doesnt mean anything..
Tack profile picture
One can debate the divestitures and the logic of a reverse stock split, but, at one thing that is becoming very evident is that GE is implementing a strategy to return to "making things," not running a second-rate finance company, biotech concern or other esoteric endeavor, about which they have proven conclusively they know little. It was/is no easy job unwinding the bloated mess, but the direction would seem to be positive and consistent.
@Tack, the biotech company made things, along with the appliance company, lightbulb company, train company. These are all manufacturing companies that were sold.
Tack profile picture
@locum2 Lightbulbs and appliances became cutthroat commodity businesses, so they're not missed. Biotech is way out of their expertise realm. (Once, I worked for Pfizer, and they bought a CT company and lost billions because they had no idea about capital equipment. This is the reverse.). Trains might have fit their mold, but the market very limited in this country.
Not really a turn around story. More of a structured liquidation. Still have lots of debt here.
wizwor profile picture
@dmau3 Stop it.
SuperPac profile picture
There are no good reasons for a long term investor to allocate investment cash to this decaying and incoherent corporate rubble.
Creative writing is an Art. Unfortunately, your article shows a lack of grasp of the fundamentals of the complex diverse business portfolio Mr.Culp inherited.
I personally give him tremendous credit for rational assessment and opportunistically moving forward to simplify the GE conglomerate Jack welsh put together and Jeffrey in melt ran into the ground.

Simply stated, the vision posited by Larry Culp publicly is returning GE into an industrial firm in a few high technology businesses and moving away from being an enormous financial entity.

Please do your homework on the numerous public statements issued by General Electric under Larry Culp.

Andrew Gori
Hi John. I respect your thoughts however I find it incredibly difficult to believe even for an instant that Larry Culp does not have a vision for what GE will look like. All of GE's decisions since he came on board to add clarity; focus on the right businesses; emphasize cash flow and efficiency - Larry had a pretty tough plate to deal with and I am not sure many could have done much better. Fact is GE is still a 'work in progress'. I would imagine with fewer shares outstanding stock buybacks are not an issue. perhaps a secondary offering in the not too distant future will serve to reduce debt even further AND more importantly for me allow GE to make acquisitions complementary to its current focus. I cannot help but feel that Larry Culp must feel the sooner GE can do this the better. GE's new CFO is about as good as it gets. Yes GE is still a work in progress and often like working with a new recipe you are not quite certain what the end game will look like what with the economy and politicians involved.
Winnertakesall profile picture
You mean your vision... Maybe you should get out and buy Tesla.
Blah blah blah blah blah
Uriah Heep profile picture
Maybe he's looking a little further into the future than you realize.
Good to see you on the forums again Mr. Mason. I thought you had possibly suffered the consequences of our leaderships health care dismantling. But you still are able to see what you have always seen. To your good health!

Each time I read one of your articles on GE, I remember Mark 4:9. It seems like Matthew 13:13 is probably more apropos as I can SEE what Culp & GE are doing, I can SEE their vision in action. And I have SEEN all the earmarks of a successful turn-around in place. Of course, I don't hear anything more than you do, and probably hear less as I am not in the C-Suite circles.

This is still a time of faith and fate. If the economy doesn't recover soon, all the old industrial concerns will be reinventing themselves or losing market share. Oh -- and I mean that seriously whether they have "vision" or not.
@cepjr I gave you a "like," but I think you and Mr. Mason agree with each other more than you think.

If you think Culp is speaking in parables, that really isn't an appropriate communication model for corporate transparency.
William- Billy Hill profile picture
I am buying more GE today given 5% dip. Culp is a leader. He knows what he needs to do and is no afraid to get it done. The future for GE is bright . Reducing debt by $30B retaining, saving close to $1B in interest expense annually and retaining a 46% interest in a non core business is very smart. Go Culp, long GE.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About GE

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on GE

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.