General Electric ditches boss John Flannery and takes $23bn hit

Lynette PayneOct 05, 2018

"We have a lot of work ahead of us to unlock the value of GE".

The profit disappointment and massive accounting writedown are just the latest in a long line of misses dating back to the leadership of Jeff Immelt, who led GE between 2001 and June of past year. The executive, who also teaches at Harvard Business School, only joined the GE board in April.

Flannery's departure comes just 14 months after he took the helm as Chairman and CEO of the company August 1, 2017.

GE is scheduled to report earnings October 25th before the market opens.

The stock jump is a sign from Wall Street "that Flannery's leadership was not providing enough value - and that the market expects Culp to be better suited for the top position", said Tim Hubbard, assistant professor of management in the University of Notre Dame's Mendoza College of Business.

At The Deal's 2018 Corporate Governance Conference in June, activist investor Peltz, whose Trian Fund has a seat on GE's board, was asked about Culp's prospects.

Culp is known as a specialist in turning companies around. "We will move with urgency".

Since achieving a peak market cap of $US594 billion way back in August 2000, GE has seen its value tumbled by nearly $US500 billion.

General Electric Co. gained the most in over nine years after the industrial manufacturer named a highly respected industry veteran as its new CEO on Monday, rekindling investors' hopes for a successful turnaround of the struggling behemoth.

That industry publication honor may provide a measure of solace as GE Power employees contemplate a newly tumultuous future.

Since then, GE has announced the sale of several divisions, including its rail and health technology units.

Changing CEOs "won't fix short-term problems at power but Larry, as an outsider, will be able to make the hard decisions on cost", said Scott Davis, an analyst at Melius Research in NY. "GE is bloated and its culture is destroyed".

Flannery vowed to give GE more of a high-tech and industrial focus by zeroing in on aviation, power and renewable energy - businesses with big growth potential. The stock was an original member of the Dow Jones Industrial Average in 1896, but was unceremoniously removed in June. "However, these problems were not created under [Flannery's] tenure", CFRA analyst Jim Corridore said in a note.

But he cautioned that the stock market's embrace of the shakeup may be "premature" because the "new CEO will face the same problems as the old".

GE warned Monday that it will miss its profit forecasts this year and it's taking a $23 billion charge related to its power business. The non-cash charge primarily relates to GE's acquisition of power assets from Alstom in 2015, GE said. But shares have dropped almost 54 per cent over the past 12 months, and in June it was kicked out of the Dow Jones Industrial Average after 111 years on the blue-chip index.

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