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. The average tenure for a CEO at the company, which was once renowned for grooming executives to run major corporations including Boeing, Home Depot and Honeywell, was almost 14 years prior to Flannery's swift exit. The stock has more than halved since he took the top job in August last year - about a half-trillion dollars in market value has been wiped out since an all-time high 18 years ago. The non-cash charge primarily relates to GE's $10.3-billion acquisition of power assets from French company Alstom SA (ALSO.PA) in 2015, GE said.
GE said the power division's goodwill balance is about US$23 billion and the impairment charge would eliminate most of it. "The changes that have taken place since Flannery's appointment have been relatively drastic with little financial results to show". The company also shrank its board and pushed out a raft of directors who served under Immelt.
The broad strategies are likely to be similar because the plan laid out by Mr Flannery was made in conjunction with heavy involvement from the board, which included Mr Culp, said Gabelli & Co analyst Justin Bergner.
Davis said GE's power business is fixable but suffered from "a lot of excess capacity and bad execution decisions" and the stock price has probably already adjusted to expectations of no contribution from power. But investors seemed unimpressed, and the stock kept falling even as USA markets notched records. Its close touched a nine-year low "as recently as last Tuesday, while the Dow Jones Industrial Average has rallied 20.5 percent", noted the market news site. It even dumped the lighting business tied to the company's iconic founder, Thomas Edison.
The 55-year-old Culp was CEO and president of Danaher Corp. from 2000 to 2014.More news: Facebook exec Adam Mosseri new head of Instagram
"Given the amount of portfolio change at the company and the prospect for further shifts in light of this news, one drawback is that shareholders do not know exactly what they will be owning in a year or two, but this factor has not stopped investors from trusting in portfolio changes at DHR and FTV".
That industry publication honor may provide a measure of solace as GE Power employees contemplate a newly tumultuous future.
GE has famously paid a dividend every year since the Great Depression.
Although its valuation tumbled when impacted by the financial crisis in 2009, the company recovered until shareholder confidence began to fall early past year.
'We remain committed to strengthening the balance sheet including de-leveraging'.