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Will the New GE CFO Achieve Larry Culp’s Goals?

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Larry Culp’s GE (GE) is set for another transition. Today, GE announced that Carolina Dybeck Happe will take charge as chief financial officer or CFO at GE, replacing from Jamie Miller early next year. Dybeck Happe is the current CFO of the Danish shipping giant, Maersk. Her Linkedin profile shows that she’s also a board member at Schneider Electric and a member of the supervisory board at E.ON. Before joining Maersk, she was CFO at Assa Abloy Group in Sweden.

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GE has focused on developing talent internally. It’s now getting its second outsider in the current top leadership position with Dybeck Happe. Larry Culp had said in July that the company was on the lookout for a replacement for Jamie Miller, who has been with GE since 2008. GE stock, which has been on a roll since GE’s Q3 earnings, was up 1.3% at 11:10 AM ET on this news.

GE CFO is a tough job

Dybeck Happe’s track record is impressive. As CFO at Assa Abloy, she helped generate over a 160% return in seven years. And that’s not all. She also helped the company report impressive revenue and income growth while delivering a robust return on invested capital.

However, her tenure at GE will face unique challenges. Despite its ongoing transformation and divestitures, GE is still far from its goal of reducing its net debt to under $30 billion. As of September 30, 2019, the company had a net debt of $49 billion. Although GE has taken steps—such as divestitures and pension freezing—to achieve that goal, the company may be running out of options.

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GE is currently in talks to sell its biopharma unit to Danaher (DHR), and it expects to generate over $20 billion in cash from the deal. However, the transaction is under regulatory scrutiny. While the sale would help GE reduce its debt, the company would also lose the segment’s revenue. The biopharma unit, which generated $3 billion in revenue last year, is a growing segment in GE’s portfolio.

Refocusing on industrials

The new GE CFO also needs to rationalize capital allocation. With diversified businesses in its portfolio, GE is complicated. So capital allocation would be Dybeck Happe’s second big challenge, after debt reduction.

Larry Culp’s strategy is to refocus on core industrials business. Even within industrials, there are four verticals. Dybeck Happe’s job would be to generate higher shareholder returns while maintaining the balance between these verticals.

Plus, the ghost of long-term care reinsurance liabilities is still present for GE. The company’s new CFO will also have to find a solution to tackle the problem that no one wants to buy.

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