From near-collapse to $689 billion: Inside Larry Culp’s turnaround of GE
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Good morning. Shawn Tully writing from New York today. “I was sure GE was going to file for Chapter 11,” Nelson Peltz told me recently. “Then Larry arrived and performed the most amazing rescue I’ve ever read about or borne witness to.”
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He’s talking, of course, about Larry Culp, who has performed one of the greatest rescues in modern business history. On Culp’s first day as CEO in 2018, GE’s market cap measured just $96 billion, down over 80% from its peak in September 2000. Today, the valuations of the three enterprises he created (GE Aerospace which he runs, GE Healthcare, and GE Vernova) total $689 billion. Combined, they’d rank as one of the top industrial companies in the U.S. by market value, second only to Tesla ($1.5 trillion), and 16th overall, edging the likes of Visa, J&J, and ExxonMobil. Since Culp arrived, the trio has garnered annualized returns of roughly 30%, twice the record for the S&P 500.
I wanted to know how he did it. So he agreed to show me. And it did not surprise me one bit that he didn’t want to meet at GE Aerospace’s executive offices near Cincinnati. Instead, he wanted to do what he calls “go gemba,” a Japanese phrase for where the real work happens, on the factory floor. So Culp took me on a tour of the historic plant in Lynn, Mass. that manufactures engines for military aircraft, such as the F-16 fighter jet and Apache helicopters. Culp was totally in his element, attired in a GE polo shirt and steel-toed shoes, pointing out the rooms where the work crews unite each morning to turn “red” to “green” by finding ways to get crucial parts to a station that needs them. Flow charts and decks created in headquarters are more likely to mask what’s really going on. It’s by watching what happens right here on the factory floor that will tell you how well or poorly an enterprise really operates, Culp says.
What impressed me most about Culp was his versatility and originality. Here is an extremely polished, articulate figure whom you can imagine smoothly making a case on tariffs to President Trump or testifying before the Senate, but who also enjoys great rapport with front-line workers. I was told that whenever he holds a ‘kaizen’ session at a plant, Culp spends time patiently explaining to union reps how he’s getting the productivity gains, and what they will mean for the workers—making the case that higher sales will eventually mean more jobs.
A former Danaher manager who’s now a CEO recalls being astounded by his first encounter with Culp, back when he was running the company. At a week-long kaizen session at a plant in Saginaw, Michigan, he recalls Culp drawing lines on the floor with the sensei from Japan, and them moving machines from one station to another with the engineers and welders. Says the former manager, “Every day he’d talk to the Teamster leaders, building a relationship with them. He wanted their buy-in.” It impressed upon the manager how important it is for a leader to roll up their sleeves, and demand that lieutenants do the same.
Read the full story about how Culp pulled off this remarkable turnaround here.
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This story was originally featured on Fortune.com