Business/Finance: CNBC Exclusive: CNBC’s David Faber Speaks with Trian CIO and Founding Partner and GE Board Member Ed Garden (Transcripts)

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CNBC's "Squawk on the Street" and CNBC's "Squawk Alley" are Live from the 2019 Milken Institute Global Conference in Los Angeles, CA. The following are the unofficial transcripts of CNBC Exclusive interviews conducted by CNBC's David Faber. 

DAVID FABER: Welcome back to "Squawk on the Street." I'm David Faber, at the Milken Institute's Global Conference. Joined now by Ed Garden, board member of GE in addition to other companies as well of course, and of course, Co-founder and CIO of Trian. Ed, nice to see you.

ED GARDEN: It's good to see you, David.

DAVID FABER: It's been awhile. A good morning, of course, to have you, given GE's earnings. The stock is up, it's being at least responded to positively by investors. But it does seem that Mr. Culp wants to temper expectations. To those who would say, 'Ah, this is the light at the end of the tunnel,' what do you say?


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ED GARDEN: What I would say is you can feel that we're getting on our front foot operationally. And I think you can feel that we're starting to make progress on the places we need to improve and the issues that we have. But nobody at GE is doing a victory lap. And 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, a lot of things that we need to improve at, and a lot of issues we need to address.

DAVID FABER: When you say feel, as a board number, what's the feeling? In other words, what goes into that feel?

Video: https://www.cnbc.com/video/2019/04/30/ge-sober-about-the-progress-that-needs-to-be-made-says-board-member.html.  

ED GARDEN: Well, if you -- maybe to frame the discussion, if you think about what's happened over the last 18 months, when I joined the board, the board was 18 people. Today it's ten people. Highly engaged, very active. The board is very facile on all the issues. It's a very strong board. This is not a board that treats a position as an on honorarium. It's very much a responsibility to shareholders. We started simplifying the business. Right? We've separated the transportation business in the Wabtec deal. We've publicly announced we're going to separate Baker Hughes GE. Simplifying that conglomerate –

DAVID FABER: Significant sale out of health care as well, of course.

ED GARDEN: Absolutely.  Something that hasn't gotten a lot of attention, David. We've announced we've taken the vast majority of corporate costs and we're pushing them down into the business units. And that's going to make the business less bureaucratic, faster moving, faster decision making, more dynamic. That's a very, very big deal.


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DAVID FABER: Will it actually have the effect of improving margins?

ED GARDEN: Absolutely. It's going to make the business much more efficient in my opinion.

DAVID FABER: How long does that take?

ED GARDEN: It takes time. It doesn't happen overnight. That's not something you flip a switch and it happens. But it's in process. New CEO. Right? First time ever an outsider CEO of GE, and not just any CEO, Larry Culp, who many think is the best industrial CEO of the last–

DAVID FABER: And do you agree with that? I mean, now that you've had an opportunity. Obviously, you were instrumental in -- he was on the board first and then elevating him to CEO. But given what you've seen, you feel as though you're confident obviously.

ED GARDEN: Yeah. Larry is a real leader of people. He's very strategic. He's a real operator. The other thing I've learned about Larry, and other great CEOs, a common trade I see is a great judge of talent. Right? Putting the right people in the right seats to manage the business. I think he's really good at that. The last thing I would mention is the culture is evolving. And I think what I've observed at the GE culture is no tolerance for rhetoric or spin. You know, very much grounded in reality. Very humble and hungry. And I think that type of culture is going to serve all our stakeholders well.

DAVID FABER: Right. But it's still going to take quite some time. I mean, we are, to bring reality in, talking about a company that still has negative cash flow. It's getting better, but it's still not even positive.


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ED GARDEN: Yeah, look. I can give you my assessment of the issues. And my goal is not to promote the stock today. But let me give you my perspective. On cash flow there are those who would say the company is not worth a lot because the cash flow is negative this year, and I understand that. I'll take the other side of the debate and say you need to look at the sum of the parts. The negative cash flow is primarily related to one business, the power business and other legacy liabilities. Our two most important businesses, aviation and health care, are generating a lot of cash. And I would argue that those two businesses are beach front property in the industrial landscape and very strategic. So, making progress on cash flow, our goal is to get power cash flow positive. But I think you--

DAVID FABER: By when?

ED GARDEN: But I think you need to look at this from the sum of the parts perspective. And Larry has talked about power getting turned around over the next couple years. It's not something that happens overnight. The other issue is leverage. And, you know, clearly, we have too much leverage. But I would take the point of view that we have line of sight to really bring the leverage down in line with our industrial peers. So, you mentioned the sale of the life science business. We're going to monetize the Baker Hughes GE stake at some point in time. We'll monetize the Wabtec stake at some point in time. And I think that we'll clearly grow the denominator in that calculation as well.

DAVID FABER: This has not gone as you might have planned originally when Trian made its first investment years ago. You know, I'm curious, from your perspective, as somebody who obviously examines your mistakes and tries to fix them, when you look back at this odyssey, my words, what do you see as sort of what went wrong and, obviously we know what you're trying to do to make it right?


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ED GARDEN: Yeah. What I would tell you is, first of all, as you know, we were asked to invest by the former management team. And in hindsight probably had too much trust and not enough skepticism. But we told the management team at that point in time that the financial commitments that they were making to us and to the rest of the investor base, we would hold them accountable to deliver on those commitments. And at some point in time, if they didn't, we would influence corporate events and corporate behavior. And that's what we've done. And we're very focused on making -- helping management and the rest of the board make this company the best in class.

DAVID FABER: Well, when you originally invested long-term care, for example, the liability was not something fully known at all. It ended up paying an enormous cost and any number of other -- we didn't know what was going on in power either and the execution issues there. Did we?

ED GARDEN: So Trian, as you know, we go into corporate board rooms and look to be a positive agent of change. As I listed the progress we've made over the last 18 months, I think it's clear that we've added a lot of value at GE and this is an iconic U.S. company. It's an important U.S. company. It's a company that's important to the world. The products are important to the world. I think it's important for us to play a role getting this company back on its feet and we will.

DAVID FABER: And finally, Ed, how many years do you think it will take?

ED GARDEN: I don't know. We'll see. When we go on the board, David, our average duration is six or seven years. We've been in Wendy's for close to 15 years. So, we'll stay as long as it takes to make this company best in class.

DAVID FABER: Well, Ed, we appreciate you taking some time, thank you.

ED GARDEN: Good to see you, David.

DAVID FABER: Nice to see you, too. Ed Garden, of course CIO, Co-Founder of Trian, and as we've made clear, a GE board member. Sara, back to you.

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