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General Electric agrees to 737 MAX engine payment deal

written by Dylan Nicholson | March 5, 2020

General Electric and Boeing have reached a 737 MAX engine payment deal to help ease GE’s cash flow problems.

GE was hit particularly hard because much of its business comes from providing jet and turboprop engines and components to commercial aircraft.

Chief executive Larry Culp said the agreement includes being paid for LEAP engines it delivered in 2019 and those to be delivered in 2020, and that the agreement was reached through GE’s joint venture with French aerospace company Safran.

“I think some of the uncertainty for us has been addressed,” said Culp, adding that it “gives us an opportunity to catch up and be paid during the course of this year for the engines that we delivered”.

“That will be a good thing at a time of some volatility to assure folks with respect to our cash position,” he said.

The 737 MAX has been grounded worldwide for nearly a year after a software issue was implicated in two deadly crashes that killed 346 people.

Boeing is awaiting approval from federal regulators, which it expects in the middle of 2020, before the plane is certified again.

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Production was halted on the 737 MAX in January, but Culp has stated he does not question the timeline Boeing has provided.

“Boeing, I think, has been crystal clear that the regulators are going to shape the timing of the return to service,” Culp said.

In January, Culp forecast GE’s first-quarter free cash flow at a negative $2 billion, attributed largely to complications with the 737 MAX.

He has also pointed to the effects of COVID-19 as another challenge causing headwinds to the company’s quarterly profits.

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