General Electric replaces CEO and shares soar

John Flannery is out as chairman and CEO at General Electric after less than two

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.

With a market capitalisation below US$100 billion as of Friday, GE was worth less than a fifth of its peak value a generation ago.

The group, also listed in London, also told investors it would take a $23 billion non-cash charge for its power business, and its EPS (earnings per share) for 2018 would fall short of its previous guidance.

He will be replaced as chairman and CEO by H. Lawrence Culp, Jr., who served as CEO and president of Danaher Corporation from 2000 to 2014.

The company's shares rose 15pc before the opening bell. The company said on Monday that it would absorb a goodwill charge of up to $US23 billion for the power segment.

GE said the power division's goodwill balance is about US$23 billion and the impairment charge would eliminate most of it.

In Culp, GE is tapping a former head of another industrial company, Danaher Corp (DHR.N).

Since achieving a peak market cap of $US594 billion way back in August 2000, GE has seen its value tumbled by nearly $US500 billion.

"During his tenure he led the highly successful transformation of the company from an industrial manufacturer into a leading science and technology company", the statement said. It was replaced by the parent company of the Walgreens pharmacy chain. But shares have dropped almost 54 per cent over the past 12 months, and in June it was kicked out of the Dow Jones Industrial Average after 111 years on the blue-chip index.

In his time, Mr Flannery has been unable to staunch bleeding at GE.

Shares in GE recovered by 16 per cent on the news of Flannery's departure in pre-market trading this morning.

"Everything's on the table, with no preconceptions and no sacred cows", Flannery said in a June Wall Street Journal interview in which he discussed plans to shed the company's health care and oil businesses. While running business development at GE Corporate, he spearheaded the acquisition of Alstom's power business, which doubled GE's installed power base and strengthened its renewables portfolio.

'We remain committed to strengthening the balance sheet including de-leveraging'.

That industry publication honor may provide a measure of solace as GE Power employees contemplate a newly tumultuous future. At the start of the global financial crisis in 2008, it was one of the nation's biggest lenders, its appliances were sold by the millions to homeowners around the world and it oversaw a multinational media powerhouse including NBC television.

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

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