Industrials

General Electric CEO says there's now less 'uncertainty' around payment for 737 Max engines

Key Points
  • General Electric's cash flow hit from the grounding of Boeing's 737 Max jet is beginning to be resolved, CEO Larry Culp told CNBC on Wednesday. 
  • "I think some of the uncertainty for us has been addressed," Culp said on "Squawk on the Street."  
  • GE produces engines for the 737 Max through a joint venture with French aerospace company Safran. 
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GE CEO Larry Culp: 'Uncertainty' around 737 Max compensation being resolved

General Electric's cash flow hit from the grounding of Boeing's 737 Max jet is beginning to be resolved, GE's CEO, Larry Culp, told CNBC on Wednesday. 

Culp said GE has reached an agreement to be paid for both the engines it delivered in 2019 and those it plans to deliver this year. The agreement with Boeing was reached through GE's joint venture with French aerospace company Safran. The joint venture manufacturers the LEAP engines used on the 737 Max. 

"I think some of the uncertainty for us has been addressed," Culp said on "Squawk on the Street." 

In January, Culp forecast GE's first-quarter free cash flow at a negative $2 billion, attributed largely to complications with the 737 Max, which has been grounded worldwide for nearly a year after two deadly crashes. 

An issue with Boeing's software was implicated in the crashes, which killed 346 people. 

Culp said GE's agreement with Boeing "gives us an opportunity to catch up and be paid during the course of this year for the engines that we delivered." 

"That will be a good thing at a time of some volatility to assure folks with respect to our cash position," he said.  

Boeing halted production on the 737 Max in January as it awaits approval from federal regulators, who must certify the plane as safe to fly. 

Boeing has told airlines and suppliers it expects to receive approval in the middle of 2020.

Culp said he believed in the timeline laid out by Boeing's new CEO, David Calhoun, who took over as chief executive in January. Calhoun worked at GE for 26 years. 

"Boeing, I think, has been crystal clear that the regulators are going to shape the timing of the return to service," Culp said.  

Shares of GE closed slightly positive at $10.95 on Wednesday. Earlier, Culp addressed investors on a call. Culp said the company's first-quarter cash flow would be reduced by $300 million to $500 million as a result of the coronavirus, but he maintained the company's full-year cash flow guidance

The stock reached an intraday high of $11.12, but then dropped below $11. 

GE hit a 52-week high of $13.26 per share on Feb. 12, but like the overall market, its stock has fallen in recent weeks as concerns about the coronavirus escalate. 

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Watch CNBC's full interview with GE CEO Larry Culp