Assembling a LEAP jet engine at the GE Aviation plant in Lafayette, Ind.
Luke Sharrett/Bloomberg News
The new CEO is bringing new tools for the job, such as his adherence to lean-manufacturing practices, developed at Toyota Motor Corp., which center on an approach known as kaizen. The system focuses on seeking continuous improvement through in-depth sessions to assess employees’ progress. GE itself, In its glory years, was considered the lodestar of management excellence.
Danaher, which Mr. Culp ran from 2001 to 2014, and which is far smaller than GE, was among the first U.S. companies to adopt lean-manufacturing practices, in the 1980s. That was a decade before GE’s celebrated former chief
deployed Six Sigma, another process-improvement system.
Now Mr. Culp has begun rolling out
Hoshin Kanri, a Japanese strategic-planning process that is part of lean manufacturing. Hoshin Kanri holds that all workers should understand the company’s strategy and how their role can contribute to it, enabling feedback and improvement to come up from lower levels.
Such programs seek to find small adjustments that will add up to large change over time. They are an approach that might expose lackluster operations, such as when Mr. Culp found that GE was spending over $100 million a year on premium shipping services to compensate for delays in getting orders out of factories on time.
“The ironic thing is that most of what he has to do is re-instill the cultural and managerial attributes that GE was justly famous for until recently,” said
a senior research analyst at investment-management firm Neuberger Berman, which owns about two million GE shares.
Mr. Culp has increased oversight of GE’s divisions, requiring formal monthly reviews and encouraging daily management of operations to get away from the end-of-quarter rush to make financial targets. Earnings per share, once the most important metric at GE, are viewed as a result that comes from managing the operations.
At GE’s Boston headquarters these days, there are constant reminders a newcomer is in charge. For one thing, the CEO often isn’t around. He drops in on manufacturing plants, sometimes alone and without warning, where he walks the floor to size up employees and how they work.
Mr. Culp—full name Henry Lawrence Culp Jr., and 56 years old—recently gathered top executives at GE’s main power-division plant in Greenville, S.C., for a weeklong teach-in on manufacturing practices. The work led to streamlining inventory for part of the assembly line for natural-gas turbines.
In May, he took GE Vice Chairman
the leader of the aviation business, to observe
’s midnight sorting process in Memphis, Tenn. The goal was to understand how GE’s aviation business fits into the operations of a customer.
Separately, Mr. Culp discovered a weekslong gap between the time GE’s Aviation division completed work and when its customers were billed, he told investors earlier this year. He said GE has cut the gap by a third.
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Mr. Culp has spent much of the past year focused on the power division, a $27 billion business that has been at the core of GE’s financial and operational problems. Saddled with excess gas-turbine inventory after misjudging demand several years ago, the unit has
burned through billions of dollars as sales slid.
The power business is working through
poorly structured deals that were signed to grab market share. And securities regulators are investigating how the division accounted for service contracts and a $22 billion write-off related to the 2015 acquisition of French company
’s power business.
In one of his first moves, Mr. Culp split the power division, separating the gas-turbine and services division from the rest. He has merged smaller operations into bigger ones, cut a thousand jobs this year and pushed leaders to continually hone processes.
He wants GE to sign deals with better economics even if this means passing on some business, and to make sure it delivers on the agreements, such as by avoiding missed deadlines and penalties. He has said it will take years to turn around the power division’s performance and work through its backlog of troubled contracts.
An internal probe two years ago found that in at least two quarters, GE recorded sales of mobile power turbines to a customer in Angola before they were transferred, according to people familiar with the investigation. It found that nearly $100 million of sales had been prematurely booked, usually just as a quarter was ending, and needed to be moved to different periods, one of the people said.
The accounting adjustments weren’t disclosed because they were deemed immaterial to a company with well over $100 billion in annual revenue, according to those familiar with the review, who added that the probe prompted changes to accounting policies.
GE recently sold its Boston headquarters, above, to real-estate developers but is staying in Boston. It plans to lease back some space.
Scott Eisen/Bloomberg News
Among executives questioned by internal investigators was
the CEO of the Gas Power division. Through GE, Mr. Strazik declined to comment.
In late July,
GE raised its cash-flow projections. Executives said the power business wouldn’t burn through as much cash as feared.
The next month, the company
faced an attack by Harry Markopolos, an accounting expert working with a hedge fund short seller. Mr. Markopolos’s group issued a lengthy report questioning several aspects of GE’s accounting and claiming it was short on working capital, sending its shares plunging 11% in a day.
Mr. Culp struck back, calling Mr. Markopolos’s analysis flawed and accusing him of market manipulation. GE said it was confident its accounting was proper. Several major investors and Wall Street analysts said they agreed with GE. The stock has recovered much of the loss.
a co-founder of
and former GE director, lauded Mr. Culp’s approach as similar to Mr. Welch’s and said he was impressed that Mr. Culp bought GE shares for his own account after the Markopolos report knocked their price down.
His “priorities are spot-on,” said Mr. Langone, who added he recently bought GE shares for the first time in 14 years.
It may take time for other investors to bet on GE again. Financial advisory firm Medley & Brown LLC in Jackson, Miss., is the sort of outfit that once would have had GE’s stock in every client portfolio because of its reliability and dividend.
Now it doesn’t own any GE shares for client accounts, said
a financial adviser at the firm, and few clients ask about the former blue chip. “Nobody sits around and wonders why I don’t own something that has lost that much value,” he said.
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