GE CEO Larry Culp Talks Tariffs
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Bloomberg Audio Studios. Podcasts, radio, news. Larry Culp, of course, is the CEO of GE Aerospace. It's always fantastic to catch up with him. Let's kick the conversation off. Larry, good morning. Nice to see you. Thanks for making the time. Let's talk about the conversation that is happening in the halls here in New Delhi, and that is about whether tariffs mean price rises. Is that conversation already beginning?

Well, we've been talking to customers throughout the weekend here at IATA about the U.S. trade policies, and really what we've tried to do, guys, is just remind everybody that what we've been advocating for is a return to where we were on the heels of the 1979 Civil Aviation Agreement, which really provided tariff-free trade amongst all the signatories. That was a positive for the U.S. aerospace industry. I think that is why the U.S. enjoys a $75 billion annual trade surplus

today, but we'll see how that plays out. There are a series of bilateral negotiations that are active. What we've shared with customers and with our investors is we think we've got about a $500 million residual cost challenge.

as a result of those tariffs. There are a whole host of things we've done with our supply chain, we're exercising the duty drawback options and the like, but we will be taking cost actions and passing along some of that residual tariff pressure. You're already seeing it, aren't you? It's already starting to impact your business. Very much so, very much so. And that's why we're managing it as best we can, mitigating it where we can through those supply chain

improvements, but also through the cost and price actions I referenced a moment ago. And customers are saying what?

They're saying, you need to do it, or you need to take that cost, or we can take some of it, or kind of how does that conversation go? Well, I think the conversation really starts back with advocacy. I think we've worked very well with our airline customers, with our airframer partners, making sure that the industry is really speaking with one voice at this point in time, because so many people, I think,

believe that the prior regime really benefited the industry. In turn, we're helping make sure that everyone understands what we're doing, both operationally to mitigate, but also, again, the cost actions that we're taking to make sure that we're buffering that as best we can. Your hope would be that you would go back to that original agreement, i.e. no tariffs on the kind of products that you make. But at the moment, it looks like 10% is the minimum.

the Trump administration is talking about. Is that now the base case? Well, we're continuing to advocate in a full-throated way, Guy, for something akin to where we were with the '79 agreement through these bilaterals, right? The US struck a bilateral with the UK. Others are active. I think June will be an important month in this regard, but that's really where we are. In terms of kind of where that takes the industry next, are we going to get

a situation where we end up with quite an uneven playing field in terms of how you deal with different customers in different parts of the globe. Well, I think it's probably too early to tell Guy again. I think we want to make sure we're advocating as forcefully as we can, taking the mitigation actions, be they operational, be they cost-oriented to the fullest extent possible, and then we'll see how things play out.

What are the big ones that you're watching for? As you say, a fluid environment, but the European Union has obviously got to be a big part of this. Very much so. Again, I think what we're looking for is to see how the negotiations play out. The July 8th date, I think, looms. So here we are in the final month, in the run-up to that. I know the U.S. government is actively engaged with multiple trading partners. Let's see how those negotiations play out.

In terms of other factors that kind of work around this, one of the other things that we're seeing as a sort of derivative of what is happening in Washington right now is a depreciating dollar.

How does that affect your business? Are you already starting to see the effect of it? Is there a translation effect that we should be looking out for? I don't think that's really a material issue for us, Guy, in large part because we transact both with our customers and our suppliers by and large in dollars. So we watch it, but it won't be a material issue for GE Aerospace. Working forward from here, we're now thinking about how Boeing and Airbus are ramping their expectations. So you've got Kelly Ortberg

looking maybe to go to 60 on his narrow body line. He just added another line. That obviously means more engines. We've also got Airbus ramping up. They're looking to get to 75. How big a challenge is that for you right now, given everything else that is going on right now?

We've got issues in the engine space right now. How challenging are those kinds of levels going to be? What a wonderful challenge to have, right? Because be it with Airbus, be it with Boeing, they are effectively sold out.

through the rest of this decade. We're fortunate to have the leadership position we have both in narrow bodies and in wide bodies. So we know we're going to have to do more in the back half of this year than we will do in the first half. We'll have to do more in 26 than we did in 25.

But that's really, for us, the benefit of this $170 billion backlog that we enjoy. So operationally, there's a lot that we're doing, Guy, to make sure we're going in as deeply as we can into our supply chain, helping our suppliers identify bottlenecks, resolve those as quickly as we can, and build the skills and build the capacity for what's going to be required as we... Those two factors interacting, the tariffs and what's happening in the supply chain, how much more complexity is being added, not taken away right now?

Well, it is what it is, right? I think we've long embraced the idea that we have to recognize and embrace the reality that we have. And that's the world that we're operating within. I'm encouraged just looking at what we did in April and May, for example.

We saw a double-digit increase in the receipts that we get from our key pacing suppliers compared to where they were in the first quarter. So the actions that are within our control, I think, are bearing fruit. We need to sustain that and build on that over time. And that's how we'll keep pace with Airbus, with Boeing, with the airlines and everyone else that rely on GE Aerospace.

A couple of quick questions. First one is, there is a lot of concern, obviously, in Washington, D.C. at the moment, your hometown, from around the issue of the deficit.

GE is a U.S. government contractor. The U.S. government is the customer. How carefully do you watch what is happening in terms of the ability of the U.S. government to continue to spend at the kind of levels that it is as the CEO of GE Aerospace? Well, we watch it with interest, as you would imagine. Most of what we do for the U.S. government is through the Department of Defense, and we're pleased to be the supplier on two-thirds of the U.S. combat aircraft

jet and rotary craft force. There's a lot that's coming as the president looks to expand the defense budget. We think that is relevant for what we do from an R&D perspective, from what we do from a next-gen, sixth-generation combat perspective. So we're very focused on those products.

to those customers mindful of the macro impact for sure. You talk about the customers. There is a concern clearly beginning to sort of grow in Washington about technology transfer when it comes to jet engines. Do you expect therefore to see greater and greater restrictions into the Chinese market as a result of that?

Well, we'll see how the trade policies play out. I think that that has always been front and center. Is it just trade or is it also national security as well? I think there is an intersection there. But that has been the case for some time with respect to what we do. There's a rather rigorous process that we've gone through for years with the U.S. government with respect to what we're able to export. I think that continues. It might get dialed up, as your question suggests. But...

That doesn't bother us. We welcome the scrutiny. We're going to continue to invest in leading-edge products. Talking of leading-edge products, we have one behind us. Are we going back to a world... So basically, just to explain, we are... Up until now, jet engines have had a sort of casing around them, but we're moving away from that now. We're going to go to super-high bypass engines. We're going back to propellers, basically. Is that what the next generation of aircraft is going to look like? Is it going to have these kinds of engines behind you attached to them?

Well, Guy, we're going to go forward with this sort of architecture, and you described well the open fan effort, which is a key part of our RISE technology development program. This is really technology, not a product thus far, but we think this is the architecture, as you just described, that will really...

to rely on the propulsive efficiency more so than the thermal efficiency of the engine to bring that next step function improvement in fuel efficiency in the latter part of the 2030s. So we're excited about this. It's been a focal point in all of our customer conversations here at IATA.

Great to see you, Larry. Thanks very much indeed for making some time for us here on Bloomberg. Fantastic to see you. Larry Culp, the CEO of GE Aerospace. Thank you very much indeed. The data that matters for your investments. The entire auto sector is higher today. And analysis on the companies making news on Wall Street. Tesla's been a stock that's been in focus. Shares have really been all over the map this morning. Listen to the Stock Movers Report from Bloomberg. Let's talk.

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