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General Electric CEO Larry Culp said at a J.P. Morgan conference on Tuesday that the company's industrial free cash flow "in 2019 will be negative."
GE shares closed down 4.7 percent at $9.89 after Culp's comment. The CEO was speaking with J.P. Morgan analyst Stephen Tusa at the firm's aviation, transportation and industrials conference in New York City.
Free cash flow is a financial term defined as money left over after a company pays for operating expenses and capital spending and is often used as a gauge of efficiency. GE's industrial free cash flow is a key measure watched by investors.
GE generated $4.5 billion in industrial free cash flow last year. Culp is working on turning around GE's fortunes as he focuses on improving the company's cash generation, as well as cutting costs.
"If we're going from $4.5 billion in 2018 to what I'm framing as negative territory in 2019 … it's really a combination of operational pressure, power … renewables, and then the non-operational pressures that I'm calling 'policy,'" Culp said.
Tusa is widely followed on Wall Street for his work covering GE. Ahead of his meeting with Culp, the J.P. Morgan analyst warned investors that GE's prized aviation financing and leasing business is "already in liquidation mode" and has weakening earnings that are "masked by gains."
"You've got a commitment from me and the senior team to continue to improve our disclosures. Full stop," Culp told Tusa. "We highlight restructuring in a host of different ways but what I'd like to have it be is more consistent."
Culp also believes GE's battered power business will struggle even more this year than last year, as he said the company expects "an even greater level of negative free cash" in the division "as we work through these issues." He said GE power will continue to face challenges for "a couple of years" more.
"We know power is in a turnaround mode and that's not going to be a quick turnaround by any stretch," Culp said. "It's going to be a few years before we can call the end of that."
Tusa asked Culp about the company's issues with its line of gas-fired power turbines, called H-class turbines.
"We had an oxidation issue that created cracking ... we've upgraded about 23 of the 33" turbines in the operation, Culp said.
Tusa both began and ended the conversation with Culp by talking about his admiration for the CEO.
"People ask me all the time if you hate me or not … anything you want to say on that?" Tusa asked.
"As I've told my daughter: We're friends," Culp said.