Published: Fri, October 05, 2018
Health Care | By Oscar Goodwin

A startling stat reveals just how dire things have become at GE

A startling stat reveals just how dire things have become at GE

General Electric has shocked markets after abruptly replacing its chief executive, John Flannery, just 14 months into his tenure, and announcing a multi-billion dollar hit on the value of its struggling power business.

Larry Culp, a GE board member who ran USA manufacturer Danaher for more than a decade, is to replace GE veteran John Flannery, effective immediately. Thomas Horton, the former CEO of American Airlines, was elevated to the role of lead director.

Flannery will be replaced by H. Lawrence Culp Jr, who had the unanimous support of the board, the company said.

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

GE further warned it will take an impairment charge related to GE Power. As a result, the Boston-based company now expects to miss its free cash flow and earnings forecasts for 2018.

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GE shares only recently fell below the $100 billion market cap threshold for the first time since the start of the 9-1/2-year bull market, back in March 2009.

Tusa's price target is the lowest on Wall Street and represents more than 11 percent downside from Friday's close at $11.29.

The stunning shakeup underscores the magnitude of the crisis at GE, which has lost half a trillion dollars in market value since the peak in 2000. It's been selling off assets and trying to sharpen its focus since the recession, when it's finance division was hammered.Flannery vowed to give GE more of a high-tech and industrial focus by honing in on aviation, power and renewable energy - businesses with big growth potential.

Culp has won praise for transforming industrial conglomerate Danaher and is seen as bringing that experience to GE, which has been floundering for two years.

The board's move comes in a little more than a year after it appointed Flannery as GE's chief executive. His short stint as CEO was marked by the continued drop in GE's stock price, layoffs, cuts to the company's dividend, and efforts to divest or spin out some of its businesses.

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The troubles in the power plant unit have been intensifying, as Reuters reported in July, with the news that one of its most valuable clients, Saudi Arabia, was lining up competitors to bid against GE for lucrative power plant work. 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.

"It is a privilege to be asked to lead this iconic company", Culp said in a statement Monday.

Flannery replaced Welch successor Immelt, himself pushed out earlier than expected last summer after nearly 16 years at the top.

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

Flannery had taken a series of steps to try to stop the bleeding, including cost cuts and significant portfolio changes.

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