GE’s Struggle: From Glory to Downgrade
New York, CNN Business – New General Electric CEO Larry Culp is facing a daunting challenge as S&P Global Ratings downgraded the credit ratings of GE and GE Capital within 24 hours of him taking over. This move comes as a stark reminder of the heavy debt burden and cash flow issues plaguing the iconic American conglomerate.
The Downgrade
S&P, Moody’s, and Fitch all highlighted GE’s high leverage and diminishing cash flows as reasons for the downgrade. Particularly troubling is the performance of GE’s power division, which has been struggling due to the shift towards renewable energy and recent mechanical problems with its gas turbines. This has led to a significant drop in profits, causing the parent company to miss its 2018 targets.
The Fallout
GE’s credit rating has been lowered from “A” to “BBB+” by S&P, a far cry from its perfect AAA rating back in 2009. Moody’s warned that further downgrades could be on the horizon due to GE’s “very elevated leverage,” which could make borrowing more expensive for the company.
The Road Ahead
Despite the grim outlook, S&P did update GE’s rating outlook to “stable,” anticipating improvements in leverage and cash flow in the future. However, tough decisions lie ahead for Culp, who may need to consider drastic measures like cutting the $4.2 billion dividend or selling off assets to reduce debt. The fate of former CEO John Flannery’s plan to break up GE also hangs in the balance.
In the face of these challenges, GE remains committed to strengthening its balance sheet and deleveraging. Culp’s leadership will be crucial in navigating the company through these turbulent times and restoring its former glory.
