**New Era for General Electric as Debt Woes Persist**
The latest development in the General Electric saga has left newly appointed CEO Larry Culp with a daunting task: tackling the company’s crippling debt. Just a day into his tenure, major credit rating agencies S&P Global Ratings, Moody’s, and Fitch issued warnings, citing concerns over GE’s escalating leverage and dwindling cash flows.
The power division, which has been struggling to adapt to the shift towards renewable energy, has been a significant contributor to GE’s financial woes. Recent mechanical issues with its gas turbines have only added to the challenges. As a result, GE announced that it will miss its 2018 targets due to plummeting profits in the power sector.
Culp faces an uphill battle in restoring GE’s once-stellar balance sheet, which boasted a perfect AAA credit rating as recently as 2009. The company’s debt has ballooned over the years, fueled by ill-timed acquisitions, a massive pension deficit, and misguided share buybacks.
While S&P has updated its outlook on GE to “stable,” citing expected improvements in leverage and cash flow, the company’s debt problems may force a reevaluation of its $4.2 billion dividend. GE’s finances have deteriorated significantly since the last dividend cut in 2017, and S&P has listed the dividend as one of several levers Culp could use to reduce debt.
GE has assured investors of its “sound liquidity position,” but Culp will need to make tough decisions, including whether to proceed with former CEO John Flannery’s plans to break up the company. With GE Power being the largest remaining business, the company’s ability to pay down debt is heavily dependent on the division’s performance.
As Culp navigates these challenges, one thing is clear: repairing GE’s balance sheet will be his top priority. Will he be able to turn the company around, or will GE’s debt woes continue to weigh it down? Only time will tell.
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