Tuesday, 16 October, 2018

GE shares soar after CEO John Flannery ousted; Larry Culp takes helm

GE shares soar after CEO John Flannery ousted; Larry Culp takes helm General Electric boss exit and $23bn hit stun Wall Street
Ben Pena | 03 October, 2018, 22:42

The conglomerate on Monday announced that it has removed former CEO and chairman John Flannery, replacing him with Lawrence Culp, effective immediately. Culp, 55, who was named to GE's board in February, was CEO of Danaher Corp from 2000 to 2014, helping grow an industrial company into a broader conglomerate through a series of acquisitions, while growing earnings.

Mr Culp indicated that he will tackle the company's problems aggressively.

It came as the group told investors that chief executive Ian Read would step down at the start of next year, but become the executive chairman as at January 1.

GE's other bombshell was that it planned to write down effectively up to $23bn in value from its troubled power business, the prime catalyst of its nosedive in stock market valuation. "I am excited to get to work".

GE shares jumped as much as 16 percent, but later pared some of the gains to trade up 9.5 percent at 11:30 a.m.in NY.

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GE also announced its GE Power business would take a $23 billion non-cash charge due to its weak performance.

The ouster of John Flannery gave GE its third chief executive in about 14 months.

"GE remains a fundamentally strong company with great businesses and tremendous talent", said Culp. Immelt had bet on growth in the sector, a vision that didn't materialize soon enough for investors. Immelt took over from Welch two days before the terrorist attacks in NY and Washington on September 11, 2001. While Wall Street was aware of the issues at GE's North American Life & Health, the size of the hit caught many off guard. The company said that the goodwill impairment charge is likely to constitute all of this balance. The company also shrank its board and pushed out a raft of directors who served under Immelt. Flannery has spent three decades at GE, running its healthcare business for about three years before taking the top job. Flannery's time as CEO has been filled with challenges and the company has sold off several businesses in an effort to right the ship. But investors seemed unimpressed, and the stock kept falling even as US markets notched records. It even dumped the lighting business tied to the company's iconic founder, Thomas Edison. Both men had been members of the industrial giant's board since April of this year.

That industry publication honor may provide a measure of solace as GE Power employees contemplate a newly tumultuous future. Monday, becoming the first outsider to run the company in its 126-year history.

"I "heart" Larry Culp, but a large amount of wood to chop", JPMorgan analyst Stephen Tusa said in a note Monday. GE halved the dividend late past year for just the second time since the Great Depression.

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