New GE Aviation Board must learn from Boeing’s Lack of Technical Oversight

GE's Culp, engine and 3 div
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 GE is spinning off its Aviation entity

                     The future of Powerplants (or whatever) will require major investment in research   

                                         Learn from the Boeing Max 8 and include  competencies  relevant to the Highest Safety levels required for aviation power                                                                                                                                                                                                                     

The below Barron’s article[1] closely scrutinizes the division of GE into three parts[2] purely from a Stock Market/Financial perspective. GE Chairman and CEO Culp and those involved into the Transition of GE Aviation to a separate entity would be well advised to review the history of Boeing’s Max 8 Debacle and the consequences of the Chicago company’s Board’s lack of technical direction or at least oversight of the development, design, manufacturing, quality control and regulatory relations.

Safety Board Findings Should Serve To Re-Invigorate The Boeing Safety Culture 10/01/2013

What The Boeing Special Airplane Design And Process Committee Review Said 09/11/2019

B777x Static Test = A Boeing Engineering Stress Test 09/16/2019

Ms. Pasztor Is The New Boeing Person In Charge Of Its Safety Culture 10/01/2019

Boeing Story Buries The Headline From An Aviation Safety Perspective 10/14/2019

Boeing Adds An Admiral To Its Board- Pluses And Minuses  10/29/2019

The Absent, Critical Point In The Boeing Chief Engineer Stories 12/14/2019

‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges 06/14/2020

Update On FAA’s And Boeing’s Remedial Actions On Aircraft Certification 07/06/2020

Boeing Board Says SAFETY; Will It Do SMS? 12/01/2020

Boeing Adds Some Safety Talent. 01/18/2021

Max 8 drawing

[sadly, Boeing’s Board and senior management have not fully “rogered” the FAA’s and Congress’ admonitions.[3]

The spun off GE Aviation organization faces the same technology challenges as Boeing-perhaps even greater research requirements in that the aviation industry MUST reduce its carbon emissions in the near future. The designs of greener powerplants and the introduction of SAFT will be high on the future GE’s investments list.

GE in 2018 overhauled its Board based on outside criticism. Its current Board, per the GE Website, has the following “technology qualified” Members–

GE present BOD tech members

 

The transition team must search for high level talents in aeronautical research, high technology manufacturing, someone with real practical and/or aviation SMS experience and a capability/willingness to ask difficult questions. The field of aircraft turbine/scram/hydrogen/lithium power systems is burgeoning and the existing companies competing are large, global and frequently supported by their governments. Another threat comes from nations which heretofore have not occupied this manufacturing sector; their funding reflects the national goals to expand their economies—whatever the cost.

 

new GE BoD?


The Math Behind GE’s Breakup Makes Sense. Here’s How.

GE to 3

By Al Root

 

Barron's logo

 

 

 

General Electric CEO Larry Culp is betting that splitting GE is the correct path forward for the once-mighty industrial conglomerate. Investors should bet that Culp is right by buying the stock.

Reviving GE (ticker: GE) hasn’t been easy. Culp has sold lots of assets, including the biopharma business and aircraft lessor Gecas. Now, GE’s epic turnaround has entered a new phase after announcing that it would break up into three companies: one dedicated to healthcare, another to power and energy, and a third to aviation. The healthcare spinoff is slated for early 2023, while power and energy will follow about a year later.

GE’s stock popped more than 7% after the announcement, but almost immediately gave back the gains, finishing the week near where it started, a sign that investors are concerned the shares might be dead money until the spins are completed. They shouldn’t worry. While no one likes to wait, good things can happen between now and 2024, and history suggests that a stock can keep rising even as a company prepares to shrink.

The best reason to bet on GE going forward is this: Culp has a vision.

That begins with the idea that GE is worth more as the sum of its parts rather than as a stand-alone enterprise—and Wall Street agrees. GE Aviation can be compared with Safran (SAF.France) and Raytheon Technologies (RTX), which trade for roughly three times sales, even though it has better profit margins than the pair. The comparison values GE Aviation, which has sales of about $21 billion, at $63 billion.

 

GE Aviation logo

History suggests that the dead-money problem might be overstated, too. United Technologies investors did just fine while that business was splitting three ways and merging with Raytheon. From the time the spinoffs were announced in 2019 until today, the stock of Raytheon, the surviving company, has climbed 43% a year on average, helped by stakes that Raytheon received in Carrier Global (CARR) and Otis Worldwide (OTIS). The S&P 500 index has averaged gains of 21% a year over the same span. And that outperformance took place even though Covid-19 hurt Raytheon’s commercial aerospace business.

One caveat: United Technologies was playing offense. GE, under Culp, started from a much weaker position.

But Culp was the first CEO to look at GE as it is, not as it once was. He ruthlessly simplified the company, including restructuring and paying down about $75 billion in debt. Since the turnaround began in early 2019, GE stock has returned 24% a year, nearly in line with the S&P 500 over that same span.

If investors are comfortable with Culp, they should rest easy holding GE stock until the spins unfold. The $130 sum of the parts is only a starting point. Don’t be surprised if Culp has more tricks up his sleeve.

 

[1] Redacted to focus on aviation.

[2] Apologies to Julius Caesar’s opening line in his  Gallic Wars Gallia est omnis divisa in partes tres

[3] Report: FAA review finds Boeing safety employees lack expertise 

GE headquarters



 

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