By Alwyn Scott
TARRYTOWN, N.Y. (Reuters) – General Electric Co Chief Executive Larry Culp said on Wednesday that the company will likely have weaker quarters for the rest of the year after a surprisingly good start in the first quarter.
The 127-year-old Boston-based conglomerate is struggling to recover from a $23 billion (£17.69 billion) loss last year and Culp, who was named CEO in October, asked investors for patience during a turnaround that he expects will take two more years.
GE’s results will balance out through 2019 and its profit and cash flow forecasts are unchanged, Culp said at his first annual meeting as the company’s CEO. GE faces several hundred million dollars in increased costs because of tariffs on imports from China, he said, in response to a question from former presidential candidate Jesse Jackson, who was among about 200 attendees.
Shareholders elected GE’s slate of 10 directors and all management proposals passed, company officials said at the meeting.
But an executive compensation proposal passed with 70.5 percent of the vote and 29.5 percent against, GE said, which was a relatively low level of support for such measures.
Institutional Shareholder Services (ISS) had recommended shareholders vote against top executives’ pay, citing concerns about directors’ discretion to set pay.
Shareholders approved allowing GE to trim its minimum board size to seven members from 10, though GE intends to appoint two more directors. Culp said a smaller board is more flexible and can talk more easily “around a smaller table.”
A measure to keep KPMG as GE’s auditor passed with a wider margin than last year, despite concerns that KPMG did not raise alarms about aspects of GE’s accounting that regulators are now investigating.
A shareholder proposal to split the CEO and chairman roles won about 27 percent of the votes. ISS had recommended a vote for the proposal, saying GE “would benefit from the most robust form of independent boardroom oversight.”
GE set its 2019 financial targets last week, which call for a cash outflow of up to $2 billion.
“It’s still tough for me to say that out loud,” Culp said on Wednesday, referring to the $2 billion figure. “But that is our reality.”
The meeting, held at a hotel about 30 miles north of New York City, was smaller and less contentious than last year’s meeting at a GE 3-D printing factory near Pittsburgh, where about 225 attended and union members protested outside.
Before the meeting, Chief Financial Officer Jamie Miller told reporters that one of the biggest changes under Culp is that GE is focusing on operations in quarterly reviews of its business.
In the past, such reviews were more high level and focused on financial results first and operations second, she said, noting she and Culp met with aviation on Monday, healthcare on Tuesday and plan to meet with the power business in about two weeks.
During the tail end of former CEO Jeff Immelt’s 16-year tenure, GE spent more than $15 billion building up its industrial business only to see most of those investments sour in 2017 and 2018.
GE also sold most of its capital business, which had supported its earnings growth, while demand for its power business has fallen sharply.
One investor said Immelt’s actions had cost shareholders dearly and asked the company to try to recover money paid and still being paid to the former GE leader.
“Clawbacks would be in order” if the board found serious misconduct, Culp said, but not for poor business decisions.
(Reporting by Alwyn Scott; Editing by Meredith Mazzilli)