General Electric's CEO warned of negative industrial cash flow for 2019, citing persistent challenges in its power-plant division, triggering sharp stock and bond declines. Larry Culp stated industrial free cash flow would enter negative territory, contrasting with $4.5 billion in positive cash flow the previous year.
The revelation intensified investor concerns about GE's financial health, with shares dropping 4.7% to $9.89 after falling as much as 7.6% during trading. The stock remains worth less than a third of its 2016 value despite a 36% annual gain.
Culp acknowledged ongoing struggles in the power business, which lost $2.7 billion in free cash flow in 2018 and faces continued demand shortfalls. Analysts noted turbine demand is half of what GE projected two years ago, with recovery unlikely before 2020.
Bond markets reacted sharply, with GE Capital debt declining as analysts warned of elevated default risks. The company's $2.25 billion 2044 maturity bond fell 1.65% amid concerns over its credit rating and debt reduction efforts.
GE's power unit has endured $22 billion in losses since 2017, exacerbated by turbine blade failures in 2015 and 2018. The company is investing $480 million to address blade defects while grappling with costly insurance liabilities from aging long-term care policies.
Culp signaled extended restructuring efforts across operations, though no cost estimates were provided. The company plans to release a full financial forecast on March 14, with ongoing support for its GE Capital unit expected despite reduced funding compared to 2018's $4 billion allocation.
