General Electric replaces CEO as it takes $23bn writedown charge

05 October, 2018, 00:31 | Author: Andrea Terry
  • John Flannery

General Electric's move to oust John Flannery as chief executive is no reason to celebrate, and may in fact be a sign of "serious issues at play", according to J.P. Morgan.

GE shares rallied Monday on news of Culp's appointment, rising 80 cents, or 7%, to $12.09, as investors bet that the well-regarded Culp can work his magic at GE.

Through its Paris-based GE Renewable Energy division, GE is among the world's top suppliers of onshore wind turbines and hydropower equipment, and is aggressively pushing into the offshore wind market.

GE also said it will take an impairment charge constituting almost all of the $23 billion of goodwill associated with its power segment, which has struggled with a downturn in the gas-turbine market.

Also on Monday, GE announced a $23 billion good will impairment charge related to its struggling power business.

In a press release, GE specifically cited weak performance in the GE Power business for a shortfall in free cash flow and earnings in 2018, suggesting other businesses were generally performing as expected.

"During his tenure he led the highly successful transformation of the company from an industrial manufacturer into a leading science and technology company", the statement said.


He will be replaced by H Lawrence Culp Jr, who had the unanimous support of the board, the company said. "However, we believe that CEO Culp will, at a minimum, re-baseline the company, drive execution and make long-term decisions that benefit the company and shareholders".

GE Power's falling profits past year forced GE to slash its overall profit outlook and cut its dividend for only the second time since the Great Depression. Culp, the former CEO of industrial manufacturing company Danaher, joined the GE board in February.

A year into Flannery's tenure, investors were reportedly concerned he was not working fast enough to restructure the company.

"I think what (Culp) will bring is sort of external mindset into the organization and particularly the ability to run a decentralized company very effectively, given that was sort of the way in which things were done at Danaher".

Additionally, the GE board appointed Thomas W. Horton as lead director. Immelt remained on as chairman through his retirement at the end of 2017, after which Flannery assumed that role as well.

"Everything's on the table, with no preconceptions and no sacred cows", Flannery said in a June Wall Street Journal interview in which he discussed plans to shed the company's health care and oil businesses. The stock was an original member of the Dow Jones Industrial Average in 1896, but was unceremoniously removed in June. The 55-year-old Culp was CEO and president of Danaher Corp. from 2000 to 2014.

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