“But nobody at GE is doing a victory lap,” stressed Garden, chief investment officer and founding partner at Trian Fund Management. “While we’re confident on the path that we’re on and the progress we’re making, we’re sober about the fact that we still have a lot of wood to chop.”
Trian — run by activist investor Nelson Peltz — has been trying to affect change at GE ever since watching the onetime multibillion stake it took in October 2015 flounder. At the time, GE shares were trading at around $26 each and Peltz predicted $40 to $45 by the end of 2017. That never happened. Instead, the stock fell off a cliff in 2017 and sank to a 52-week low of $6.40 per share in December 2018, even below the 2008 financial crisis low.
Trian’s stake shrunk some over a three-year period from 98.5 million shares to 73.7 million, according to the investment firm’s fourth-quarter 13F filing with government regulators. At $10 per share, which reflects Tuesday’s strength on earnings, the stake is worth under $800 million.
Garden was put on the GE board in 2017, shortly after Peltz and Trian pushed out longtime CEO Jeff Immelt. John Flannery, who then took over, only lasted 14 months, due to frustrations about the pace of his turnaround efforts.
Flannery was succeeded by Larry Culp, who had been a GE board member since April 2018. Culp, now 55, was previously CEO of global conglomerate Danaher for about 14 years until 2014.
Garden on Tuesday, just hours after GE delivered rosier first-quarter results, praised Culp’s abilities as a “real leader of people” and a “great operator” strategically, and Culp’s progress in his short tenure.
“The culture is evolving” under Culp, Garden told CNBC’s David Faber from the Milken Institute Global Conference in Beverly Hills, California. There’s “no tolerance for rhetoric or spin” and it’s “very much grounded in reality, very humble and hungry” Garden observed.
Garden said GE should be viewed as a “sum of the parts” story. “The negative cash flow is primarily related to the troubled power business and other legacy liabilities” and to some extent leverage, he said. “Our two most important businesses, aviation and health care, are generating a lot of cash,” calling them “beachfront property in the industrial landscape.”
Despite the long road ahead Trian still sees promise in GE, Garden said. “When we go on the board, our average duration is probably six or seven years. We’ve been in Wendy’s for close to 15 years. We’ll stay [at GE] as long as it takes. ” He added, “[General Electric] is an iconic U.S. company, an important U.S. company. It’s a company that’s important to the world, the products are important to the world.”