Unlike its new partner, Ford, General Electric Co. released its Q2 financials and the news isn’t too good, although company executives remain optimistic.
GE’s aviation segment fared worse than its other divisions, however, GE Healthcare revenue also declined 21% to $1 billion, with segment profits dropping to $550 million from $958 million.
GE Chairman and CEO H. Lawrence Culp said demand for COVID-19-related products increased but not enough to offset the decreased demand for non-COVID items, including a lower volume in pharmaceutical diagnostics.
“We had a very challenging second quarter that we met head-on, executing well operationally while we took actions to further de-risk our company,” said Culp in a news release. “Our earnings performance was impacted by the ongoing impact of COVID-19 on our businesses, but Industrial free cash flow was better than our expectations and previously communicated range. We made faster progress on elements within our control, including our targeted cost and cash preservation actions."
Culp also made a guest appearance on the Bloomberg Baystate Business radio program and said the company remains focused on its ongoing transformation and expects profits to increase in the future, despite the setback.
“If you look at the pace at which our new leaders have assimilated into the business, the adoption of lean principles across the organization, the way we're using digital more broadly to serve customers — there’s just a host of examples; that I think when the dust settles, in addition to the cost and cash preservation actions that we’re taking, that we’ll see that we did, in time, accelerate the transformation of this company,” Culp said
. “We will need more time, but I think we’re gonna take and make good use of that time to complete the transformation. ... Fortunately, with $41 billion of liquidity, having extended another $10 billion of near-term maturities, with a $22 billion debt reduction we’ve seen since the beginning of last year ... we have positioned ourselves to weather this storm."
In March, GE collaborated with Ford to manufacture a simplified design of GE Healthcare’s existing ventilator to specifically address urgent needs during the pandemic including essential functions required to safely treat COVID-19 patients.
The partners then embarked on a second project to boost production of the GE/Airon Model A-E ventilator, which uses a design that operates on air pressure without the need for electricity.
“The Ford and GE Healthcare teams, working creatively and tirelessly, have found a way to produce this vitally needed ventilator quickly and in meaningful numbers,” said Jim Hackett, Ford’s president and CEO, in a press release.
Ford, which released better-then-expected Q-2 results yesterday, said the new design meets the needs of most COVID-19 patients with respiratory failure or difficulty breathing, can be set up quickly, and be deployed in an emergency room setting during special procedures or in an intensive care unit. The goal: 1,500 ventilators by the end of April, 12,000 by the end of May and 50,000 by July 4 — helping the U.S. government meet its goal of producing 100,000 ventilators in 100 days. Ford said it should push out another 50,000 patient ventilators by the end of August.
Ford also stepped up its engineering and manufacturing response for personal protective and other healthcare equipment, including more than 18 million face shields and 33-plus million face masks, more than 32,000 powered air-purifying respirators in a collaboration with 3M, 1.4 million washable isolation gowns a week for three months with suppliers, and about 7,500 ambulances, so far, prioritized by JMC, a Ford joint venture in China.
As for GE Healthcare, Culp expects a solid recovery, albeit when that will happen remains unclear.
"We're working through a still-difficult COVID-19 environment, and while it's too early to predict the trajectory for the recovery of commercial aviation, we continue to plan for a prolonged return to prior levels of activity,” Culp told Bloomberg. “Still, based on what we see today and the actions we've taken, sequential improvement in earnings and cash in the second half of the year is achievable. We expect to return to positive Industrial free cash flow in 2021. We are accelerating our transformation to make GE stronger and drive long-term, profitable growth."