GE pours US$4b into balance sheet as cash flow rebounds

[BOSTON] General Electric poured US$4 billion into repairing its balance sheet, furthering steps to whittle down a pension liability that has been a thorn in chief executive officer Larry Culp's turnaround efforts.

The manufacturer prefunded about US$2.5 billion in pension requirements for the next three years and repaid US$1.5 billion of an intracompany loan to GE Capital, according to a statement Tuesday. Mr Culp cited GE's existing forecast for at least US$2.5 billion in industrial free cash flow this quarter and positive cash flow next year.

"These steps further reduce debt, de-risk our balance sheet, and put us on stronger financial footing to accelerate GE's transformation," Mr Culp said in the statement. The actions and scheduled fourth-quarter maturities mean GE will reduce debt by about US$14.5 billion this year and by roughly US$28 billion since the beginning of 2019, the company said.

Pension liabilities have been among the most stubborn issues complicating Mr Culp's two-year tenure leading the Boston-based company. GE froze pension benefits for more than 20,000 employees late last year and finished 2019 with about US$23 billion in underfunded pension liabilities.

GE made progress in this year's third quarter, reporting a surprise profit and the rebound in cash flow that allowed the company to take the actions announced Tuesday. GE previously announced it would prefund US$4 billion to US$5 billion this year to meet minimum pension funding requirements.

GE's jet-engine manufacturing business, meanwhile, has been hit hard by the Covid-19 pandemic's effect on air travel and the 20-month grounding of Boeing's 737 MAX. With the workhorse aircraft starting commercial flights again this week, deliveries are set to ramp up.

BLOOMBERG