Flannery Takes Fall for GE Power Struggles
GE announced that H. Lawrence Culp Jr. has been named chairman and CEO of the company replacing John Flannery effective immediately. GE's board of directors voted unanimously on the decision, and it also appointed Thomas W. Horton as lead director.
In a press release, GE specifically cited weak performance in the GE Power business for a shortfall in free cash flow and earnings in 2018, suggesting other businesses were generally performing as expected. As such, the company expects to take a non-cash goodwill impairment charge related to the GE Power business of about $23 billion. However, the impairment charge has not yet been finalized and remains subject to review.
Flannery became GE's CEO on August 1, 2017, succeeding Jeffrey Immelt in the position. Immelt remained on as chairman through his retirement at the end of 2017, after which Flannery assumed that role as well. 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. Nothing seemed to help, however, as the company's stock price waned throughout his tenure, decreasing more than 56% to a low of $11.21 last week. The company received a slap in the face in June when it was removed from the prestigious Dow Jones Industrial Average; GE had been the last original member of the 1896-created blue-chip index, and had continuously been a member since November 1907.
Culp served as CEO and president of Danaher Corp. from 2000 to 2014. During his tenure he led a transformation of the company from an industrial manufacturer into a leading science and technology company. During his 14 years as the head of Danaher, the company's market capitalization and revenues grew five-fold. Horton served as chairman and CEO of American Airlines from 2011 to 2013, and chairman of American Airlines Group from 2013 to 2014. During his tenure he led the successful restructuring of the airline and its eventual merger with US Airways, creating the world's largest airline.
"GE remains a fundamentally strong company with great businesses and tremendous talent. It is a privilege to be asked to lead this iconic company. We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency. We remain committed to strengthening the balance sheet including deleveraging. Tom and I will work with our board colleagues on opportunities for continued board renewal. We have a lot of work ahead of us to unlock the value of GE. I am excited to get to work," Culp said in the release.
The announced leadership changes resulted in a nearly 14% stock price increase in premarket trading.
-Aaron Larson is POWER's executive editor (@AaronL_Power, @POWERmagazine).
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