GE Abruptly Fires CEO John Flannery, Appoints Lawrence Culp as Chief Executive

Faith Castro
October 3, 2018

And in recent days the company's market value slipped below $100 billion after approaching $600 billion about 18 years ago.

GE named Culp to replace Flannery as it warned the company would fall short of recent forecasts for cash flow and profit growth, citing the weak performance of its power division.

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

Last week, GE shares reached a nine-year low following a 10 percent drop after news of a glitch in new power-plant turbine technology that temporarily shut two electricity plants in Texas. One of its biggest blunders was its $10 billion deal to buy Alstom in 2015, a deal driven by Flannery, who was head of GE's business development at the time. Flannery's time as CEO has been filled with challenges and the company has sold off several businesses in an effort to right the ship.

GE shares, which were trading around $11 - near levels last seen during the financial crisis - popped 7.1 percent on the news of Flannery's ouster, to $12.09.

The stock jump is a sign from Wall Street "that Flannery's leadership was not providing enough value - and that the market expects Culp to be better suited for the top position", said Tim Hubbard, assistant professor of management in the University of Notre Dame's Mendoza College of Business.

GE also said it will take an impairment charge constituting almost all of the $23 billion of goodwill associated with its power segment, which has struggled with a downturn in the gas-turbine market.

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As September rolled around, board members were frustrated with what they saw as a "slow pace of change", CNBC reported.

"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".

Analysts noted that despite the seemingly good news, GE still has its work cut out for it. "GE is bloated and its culture is destroyed". The company was expelled this year from the Dow Jones Industrial Average.

The industrial giant said John Flannery would be replaced by Larry Culp, former chief executive of manufacturing group Danaher, as it revealed the $23bn writedown charge.

"Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered", CRA Research analyst Jim Corridore wrote to clients. Culp will succeed John Flannery as chairman and CEO.

Culp said in a statement, "We will move with urgency ..." The company said on Monday that it would absorb a goodwill charge of up to $US23 billion for the power segment.

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