Medical

GE ousts Flannery, names Lawrence Culp chairman and CEO

GE ousts Flannery, names Lawrence Culp chairman and CEO

General Electric has shocked markets after abruptly replacing its chief executive, John Flannery, just 14 months into his tenure, and announcing a multi-billion dollar hit on the value of its struggling power business.

The company also said it would fall short of its guidance for free cash flow and earnings per share for 2018 due to weakness in its power business, something analysts had expected. GE will need to take a goodwill impairment charge of almost all the $23 billion in its goodwill balance, according to the company.

Larry Culp, who is highly respected on Wall Street for transforming manufacturer Danaher Corp., takes over immediately, GE said in a statement Monday. Since Flannery took the CEO reins from Jeffrey Immelt on August 1, 2017, its shares have plunged 55.6 percent through Friday, according to MarketWatch. The dismissal ended Flannery's push to modernize GE after just a year in office. The company received a slap in the face in June when it was removed from the prestigious Dow Jones Industrial Average; GE had been the last original member of the 1896-created blue-chip index, and had continuously been a member since November 1907.

Culp's time as CEO of Danaher was marked by expanding the reach of the company into fields as diverse as dental imaging and water filtration. GE, scheduled to report results on October 25, declined to comment.

Mr Flannery's departure from GE is driven by "slow pace of change" under his leadership, CNBC reported, citing a text from a source.

GE doubled down on fossil fuels in 2015 under Immelt with the $10.3-billion purchase of French group Alstom SA's power business. Other divisions are on track, the company said in a statement today.

Changing CEOs "won't fix short-term problems at power but Larry (Culp), as an outsider, will be able to make the hard decisions on cost", said Scott Davis, an analyst at Melius Research in NY. That deal gave GE more exposure to older coal plant technology at a time when coal plants were being shut down as too costly. "GE is bloated and its culture is destroyed". The company said in June that it would spin off its healthcare business and split from oil giant Baker Hughes in a massive reorganization.

The CEO move was not enough for Jim Corridore, director of industrials equity research at CFRA Research, to recommend investors buy GE stock.

That same day, Flannery said GE might take the radical step of splitting up the main company's three main businesses- aviation, health care and power - into separate entities. "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".