GE CEO sees 'choppier' operating environment next year

By Rajesh Kumar Singh

CHICAGO (Reuters) - General Electric (NYSE:GE) Co's Chief Executive Larry Culp on Tuesday warned companies are likely to face a "choppier" operating environment next year, but expressed confidence that his company would be able to work its way through it.

"We feel pretty good about our potential to control the controllable," Culp told Reuters in an interview. "But it's likely to be a more difficult environment next year for everybody than it has been here in (20)22."

The International Monetary Fund this month further cut its 2023 global growth forecasts, warning that colliding pressures from inflation, war-driven energy and food crises and sharply higher interest rates were pushing the world to the brink of a recession and threatening financial market stability.

Culp, however, said a ramp-up in the aerospace industry following a strong recovery in air travel, coupled with a push worldwide to reduce carbon footprints and a growing demand for better healthcare will help GE deal with operating challenges.

GE's aerospace business, which makes and services jet engines, reported a 24% year-on-year increase in revenue and a 52% jump in profit in the quarter through September.

With no signs of a letup in air travel demand, the Boston-based company sees "significant" long-term growth opportunity for its aviation business.

However, capacity constraints at GE and its suppliers due to shortages of labor, parts and raw materials have made it tougher for its aviation as well as healthcare businesses to keep up with demand.

Culp said while supply-chain pressures have eased, they are still hurting the company. As part of efforts to mitigate the problem, he said the company is carrying excess inventory and ordering some parts and raw materials well in advance.

"We are carrying inventory and incurring excess cost because of these supply-chain issues," Culp said, adding that excess inventory and costs are "very real" near-term challenges for the company.

Culp said GE has deployed 200 engineers at aerospace manufacturing sites to quickly do "the root cause analysis" of supply issues and put in countermeasures at the company's and its suppliers' facilities. It is also helping suppliers reduce their reliance on labor, he said.

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Those efforts led to a double-digits increase in jet engine deliveries since the second quarter.

"We just have more to do in the years to come," Culp said.