General Electric, mired in a deep slump, has ousted CEO John Flannery after barely a year on the job.
Flannery is being replaced by Larry Culp, a respected outsider who formerly led the industrial manufacturing company Danaher. GE installed Thomas Horton, the former CEO of American Airlines, as its lead director. Both changes are effective immediately.
GE has been hobbled by years of poorly timed deals and needless complexity that predate Flannery’s tenure as CEO. Flannery launched a turnaround plan this year that would narrowly focus GE on aviation and power, but the makeover failed to instill confidence in investors.
GE announced the changes early Monday as it revealed more bleak financial news: The conglomerate warned that its 2018 profit will “fall short” of guidance because of “weaker performance” at its struggling power division.
GE further warned it will take an impairment charge related to GE Power. The company said the charge, which is still being finalized, will likely total nearly $23 billion.
“GE remains a fundamentally strong company with great businesses and tremendous talent. It is a privilege to be asked to lead this iconic company,” Culp said in a statement. “We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency.”
The stock jumped 14% in premarket trading.
Culp, 55, is credited with leading a turnaround at Danaher, which makes everything from dental tools to consumer packaging. GE said that during Culp’s 14-year tenure, Danaher’s sales increased fivefold and the stock price raced ahead of the S&P 500.
In other words, exactly the opposite of the situation at GE. Despite the strong economy and booming stock market, GE’s stock price has crashed by nearly two-thirds since the end of 2016. Longtime CEO Jeff Immelt was replaced by Flannery, a 30-year GE veteran, in August 2017.
To pay off debt and jump-start the stock, Flannery announced plans to sell many of GE’s businesses, including its century-old railroad division, Thomas Edison’s light-bulb unit, Baker Hughes and the health-care unit that makes MRI machines.
GE’s shares nearly one-third this year as investors worried about the company’s mounting debt and shrinking profit.
The sell-off accelerated last month after GE said that two of its gas turbines failed, forcing the closure of power plants. The turbine trouble could tarnish GE Power’s reputation and hurt sales at a time it’s strapped for cash.
GE, an original member of the Dow since 1896, was booted from the exclusive index over the summer. Last week GE’s market value fell below $100 billion for the first time since March 2009. As recently as 2004, GE was the most valuable company in America, worth nearly $400 billion.