GE, seeking path forward to reinvent itself, ousts CEO

Henrietta Brewer
October 3, 2018

Stock prices have decreased by more than half since Flannery took the top job in August of 2017, and with the news of his departure, GE's shares rose 15 percent before the opening bell on Monday.

GE, founded in 1892, has lost more than $500 billion in market value since 2000, the year former longtime GE CEO Jack Welch announced his retirement, according to Bloomberg.

John Flannery was unexpectedly ousted as boss of General Electric yesterday as the $110 billion industrial conglomerate warned that troubles in its power business would cause it to miss its full-year profit forecast.

His successor, Culp, who had the unanimous support of the board, said in a statement: "GE remains a fundamentally strong company with great businesses and tremendous talent".

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

In June, Flannery made good on that promise when GE said it would spin off its health-care business and sell its interest in Baker Hughes, a massive oil services company.

GE shares jumped 14 per cent to US$12.88 in early trading as investors bet Culp could re-energize the GE brand and more quickly transform its portfolio.

GE gave no explanation for Flannery's abrupt removal but CNBC reported it was "driven by the board's frustration with the slow pace of change under his leadership".

"GE Power's current goodwill balance is approximately $23bn and the goodwill impairment charge is likely to constitute substantially all of this balance", the company said.

The power division's outlook appeared to worsen last month when GE said several power plants equipped with its newest turbines had to be shut down because of a part failure.

The big goodwill write-down "suggests that the power business and its cash flow are not coming back any time soon, and ratings agencies have been clear that if this were the case, they would downgrade", Tusa claims. Both men had been members of the industrial giant's board since April of this year. The deal expanded GE's exposure to gas, coal and nuclear power.

Analysts noted that despite the seemingly good news, GE still has its work cut out for it.

He brought familiarity with many of GE's flagship business units, but that alone would not suffice.

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".

The CEO move was not enough for Jim Corridore, director of industrials equity research at CFRA Research, to recommend investors buy GE stock. The non-cash charge primarily relates to GE's acquisition of power assets from Alstom in 2015, GE said.

Culp said in a statement, "We will move with urgency ..."

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