GE replaces CEO it hired just a year ago

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

The move hastened the decline of GE jobs in Pittsfield from roughly 7,000 to 3,600 over the next five years.Just six months after taking over as CEO, Flannery said the company would be forced to pay $15 billion to make up for the miscalculations of an insurance subsidiary. Culp has served on GE's board since April. Flannery launched a turnaround plan this year that would narrowly focus GE on aviation and power, but the makeover wasn't fast enough to restore confidence among investors.

GE's latest woes stem from continued weakness in its power division, which have been a drag on the overall business. "The impairment charge is not yet finalised and remains subject to review".

GE's board, meeting in the last few days, unanimously picked H. Lawrence Culp Jr as its new CEO. "It is a privilege to be asked to lead this iconic company", Culp said in a statement.

The announced leadership changes resulted in a almost 14% stock price increase in premarket trading.

In addition to adding Culp to the board, GE also appointed Thomas Horton, the former chief executive of American Airlines and AT&T, as lead director - citing his experience with corporate restructuring in the merger of American and US Airways.

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". Among his many achievements at Danaher was leading it to make several value-creating acquisitions.

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.

After replacing Jeff Immelt in August 2017, Flannery had unveiled a plan to slim GE's operations down.

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One of Culp's challenges will be to deal with GE's "long-cycle" businesses like power that defy easy fixes.

"Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered".

Culp's time at Danaher "could not have been more different to this with a very clean balance sheet, no dividend, and generally solid short cycle businesses", Tusa added.

Under Immelt, GE made a big M&A splash by acquiring Alstom's power business for $9.5 billion. On Friday, the company's shares were down to $11.29, far from its 52-week high of $24.89.

GE, an original member of the Dow since 1896, was dropped from the index last summer.

GE has endured a hard year in which it has lost more than half of its stock market value and been ejected from the Dow Jones Industrial Average after more than a century's membership. As recently as 2004, GE was the most valuable company in America, worth almost $400 billion.

Culp, for his part, tried to sound optimistic.

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