General Electric Co. (IW500/6 ) soared after ousting John Flannery a little more than a year into his tenure as CEO, replacing him with a renowned turnaround expert.
Larry Culp, who is highly respected on Wall Street for transforming manufacturer Danaher Corp., takes over immediately, GE said on Oct. 1.
GE now expects to miss its 2018 earnings forecast and take an impairment charge for almost all of the $23 billion of goodwill associated with its power segment. The operation has struggled with a downturn in the gas-turbine market.
“He’s an outsider and maybe it’s going to take an outsider to come in and fix this thing,” said Scott Davis, an analyst with Melius Research. He said he “didn’t see this coming at all.” Flannery “seemed like he was on the right path, but he was slow.”
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. The problems deepened in the past two years as GE faced cash-flow shortfalls, slumping demand and investigations by the U.S. Securities and Exchange Commission.
The shares climbed 15 percent to $12.95 in New York premarket trading Monday. GE had fallen 35 percent this year through Sept. 28, following a 45% decline in 2017. The company was expelled this year from the Dow Jones Industrial Average.
Flannery had taken a series of steps to try to stop the bleeding, including cost cuts and significant portfolio changes. He has already pledged to sell or spin off longtime GE businesses including transportation, health care and lighting while focusing on power equipment, renewable energy and jet engines.
Culp, 55, who joined the board in April, becomes the first outsider named as GE’s CEO in the company’s 126-year history, highlighting the monumental changes afoot at the beleaguered manufacturer. Thomas Horton, the former CEO of American Airlines who also joined GE’s board this year, was named lead director.
“We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency,’’ Culp said in the statement.
Culp’s time as CEO of Danaher was marked by expanding the reach of the company into fields as diverse as dental imaging and water filtration. More than 90 percent of the transactions Culp oversaw at Danaher were company takeovers, according to data compiled by Bloomberg.
Deal volume topped $22 billion during Culp’s 14 years at the head of the company, with his biggest move being the 2011 acquisition of diagnostic-equipment maker Beckman Coulter Inc. for $6.8 billion.
By Richard Clough
