How Ray Dalio and Bridgewater Contributed to GE’s Turnaround

Culp, according to Rob Copeland’s recently published book The Fund, took on a leadership role at Bridgewater for a short time in 2015, shortly after leaving a successful 14-year run as head of the industrial and healthcare conglomerate
Danaher
(DHR).

The book makes It sound as if Culp and Dalio mixed like oil and water. Dalio wanted Culp to suggest ideas about how to manage the firm using committees and ideas in Dalio’s book called Principles. Culp believed that Bridgewater had too many people with poorly defined roles, and that it made more sense for one person to be in charge.

After the exchange where Culp laid out his ideas, Dalio said Culp wasn’t a conceptual thinker, fired him on the spot, and “left the room,” according to the book.

It’s characterized as a firing, but Culp was a Bridgewater advisor, not a full-fledged employee. GE declined to comment about Culp’s work at the hedge fund. Bridgewater didn’t immediately respond to a request for comment.

It’s a salacious bit of corporate drama. GE investors, however, should be happy the two didn’t see eye to eye. Culp, of course, went on to take the top job at GE in 2018. He rapidly sold assets to reduce a massive debt load. Now he is splitting GE up into three businesses.
GE Healthcare Technologies
(GEHC) was spun out at the start of 2023. GE Vernova, GE’s power generation business, is slated to be spun out in the first half of 2024. That will leave GE with its leading aerospace franchise that Culp will continue to run.

All three businesses should have investment-grade balance sheets when independent. That’s one sign of the hard decisions and heavy lifting done over the years.

Culp is a disciple of lean management, which isn’t new for U.S. businesses. It has roots in post-World War II Japan and, very roughly, is all about inclusive, decentralized, and hands-on management, along with statistical process control to constantly improve operations and tackle problems.

How lean is applied is always the most important thing, and Culp’s application at GE has yielded results. Take the aerospace business. Operating-profit margins at GE’s aerospace business came in at 20.4% for the third quarter of 2023. In 2017, amid a strong period for the industry and about a year before Culp took over, aviation margins came in at 20%.

Beating 2017 numbers in an environment impacted by Covid-19, supply-chain struggles, and high inflation is a very significant feather in Culp’s cap. GE has also improved profit margins in the gas-power and wind-power businesses during Culp’s tenure.

Then there is the stock. GE stock, adjusted for the GE Healthcare spin, is up roughly 50% under Culp. From the depths of December 2018, shortly after Culp took over and when investors started to understand the scope of GE’s problems, shares are up more than 100% while the
S&P 500
gained roughly 50% over the same span.

Beating, or matching, the S&P 500 is also impressive, given that GE stock lost roughly 70% of its value from December 2013 to December 2018.

Why things didn’t work out at Bridgewater is still an open question. There was a clash of personalities, but hedge funds aren’t like other businesses. Hedge funds oftentimes have powerful founders that direct the investment process. What’s more, a small number of trades typically account for a large portion of any year’s gains or losses.

In traditional manufacturing, every transaction matters. Companies make a little money on each sale of many products and services. Manufacturers are always looking to squeeze a little more profit out of the system while engaging a large workforce.

Maybe the systems are too different for managers at one to have a positive impact on the other.

In any case, GE investors are happy with how things turned out.

Write to Al Root at allen.root@dowjones.com