GE Abruptly Replaces CEO Flannery with Former Danaher CEO Culp

GE Abruptly Replaces CEO Flannery with Former Danaher CEO Culp

GE Abruptly Replaces CEO Flannery with Former Danaher CEO Culp

General Electric Co. soared after ousting John Flannery a little more than a year into his tenure as chief executive officer, replacing him with a renowned turnaround expert.

In addition to announcing the executive shakeup, GE also said on Monday that its power business has been performing worse than anticipated and will not hit its 2018 cash flow and earnings guidance.

GE warned Monday that it will miss its profit forecasts this year and it's taking a $23 billion charge related to its power business.

The company said on Monday that H. Lawrence Culp, Jr. would take over as chairman and CEO effective immediately.

Tusa added that GE shares tend to outperform on the day of major news events that "change the narrative" on sentiment such as the June 2018 news of plans to separate GE's health-care business and cut debt, as well as the resignation of former CEO Jeff Immelt in June 2017.

Earlier this year GE announced plans to dramatically reshape the company, with plans to sell off a range of businesses including healthcare, transportation and oil & gas, while focusing on three core industrial pillars: Power, Renewable Energy and Aviation. Flannery worked to divest GE's interests in other operations and improve the company's increasingly poor performance. He's already a member of GE's board.

While GE's stock spiked as much as 16% on the news of Flannery's departure, the company's shares are still down 29% this year.

One of Culp's challenges will be to deal with GE's "long-cycle" businesses like power that defy easy fixes. GE, scheduled to report results on Oct 25, declined to comment.

"We believe the language writing down all of Power's goodwill and recognizing both cash and EPS shortfalls set the stage for re-baselining the company, dividend policy and capital deployment again, with the note that an update is coming in the earnings call". Flannery "seemed like he was on the right path, but he was slow". "GE is bloated and its culture is destroyed".

General Electric said in June it will spin off its healthcare business and divest its stake in oil-services firm Baker Hughes, effectively breaking up the 126-year-old conglomerate - once the most valuable US corporation and a global symbol of American business power. Under Immelt, GE's shares lost more than a third of their value. 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.

CFRA Research analyst Jim Corridore said it was probably positive that GE had tapped an outsider to lead the company instead of another company veteran as Flannery had been.

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

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