GE posted its first-quarter earnings on Wednesday. Reflecting on “a challenging quarter,” GE Chairman and CEO H. Lawrence Culp Jr. said “the world has fundamentally changed” in the eight weeks since he last updated analysts and investors. “This was a challenging quarter for GE, especially in Aviation, where we saw a dramatic decline in commercial aerospace as COVID-19 spread globally in March,” Culp said.
Culp said the pain would extend into the second quarter of 2020, the first full quarter with pressure from COVID-19. “We expect that our financial results will decline sequentially,” he wrote in a LinkedIn post.
But while acknowledging that there were still “many unknowns,” he pointed out that the current situation will change. “The bottom line is we have some challenging times ahead, but there will be another side,” he said. “Planes will fly again, healthcare will normalize and modernize, and the world still needs more efficient, resilient energy. I’m confident the underlying reset we took over the last 18 months to focus GE on customers and lean operations gave us a running start for what we all now face today.”
The CEO highlighted the work of GE employees helping customers, and each other, to safely defeat the pandemic. “I’d like to acknowledge our employees out in the field and in our factories for their unwavering dedication as they continue to deliver for our customers, supporting essential services like hospitals, power generation, national defense and the airlines,” Culp said.
Culp also said GE recently established an Employee Relief Fund, and more than 75 senior leaders have contributed portions of their salary to support those affected by this crisis.
Many of the themes in Culp’s post were also reflected by Steve Winoker, the vice president for investor communications at GE. In his letter to investors, Winoker listed a number of actions the company has taken to manage risks and proactively mitigate the financial impact of COVID-19. “Across the company, GE is targeting more than $2 billion in operational cost out and more than $3 billion in cash preservation activities in 2020 to improve its cost structure and preserve its ability to serve customers,” Winoker said.
Winoker also said the company has strengthened its balance sheet and reduced leverage following the sale of its BioPharma unit to Danaher for approximately $20 billion. He said at the close of the quarter, GE held cash, cash equivalents and restricted cash of about $48 billion. “In summary, we’re facing into near-term reality and preserving our strength in light of COVID-19,” Winoker said. “This doesn’t mean that our multiyear transformation stalls. Instead, we expect it to accelerate as our cost and cash actions take hold.”
One of the key pillars of this transformation is GE’s embrace of lean manufacturing. Culp said “from daily management; to traditional Kanban systems, which help reset inventory levels for the new demand environment; to new problem-solving tools we’re rolling out,” lean is helping the company improve its cost structure. He shared a recent example from a GE Gas Power plant in Greenville, South Carolina, where workers used the approach to cut the distance that a single part travels during production from 3 miles to a mere 165 feet, slashing the time it took to machine that part by 42%.
Said Culp: “During this unprecedented pandemic, the GE team is focused on protecting the safety of our employees and communities, serving customers in their critical time of need, and preserving our strength for the long term. GE is delivering critical infrastructure across the globe, including our teams at GE Healthcare supporting caregivers who diagnose and treat COVID-19 patients every day.”
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