GE Moves on from Flannery
General Electric Co. fired Chief Executive John Flannery after 14 months in the job as deeper problems in the conglomerate’s troubled power unit blindsided the board and caused GE to warn it would miss profit and cash targets. The company named board member Larry Culp, who became a director in April, its new chairman and CEO, effective immediately. Mr. Culp, a former CEO of Danaher Corp., had joined GE’s board as part of a broader shake-up of the struggling conglomerate.
Shares of GE, which have tumbled by half during the past year after the company slashed its dividend and missed financial targets, rallied on the news. On Monday, the stock rose 7.1% to $12.09. GE warned it would miss its profit and cash-flow goals for 2018. GE also said it planned to take an accounting charge as large as $23 billion for its power business, which makes turbines for power plants and has been struggling with weak demand.
“The market didn’t even give the company the benefit of the doubt that things would work,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. “Flannery’s plan hasn’t worked.” GE also ran up against a seismic shift in the business world that has catapulted technology companies over traditional manufacturers.
In 2007, before the financial crisis, GE was the second-most-valuable company in the world, joined by the likes of Exxon Mobil, Royal Dutch Shell and Toyota. Now that list is dominated by tech giants such as Google, Facebook and Microsoft. As Apple and Amazon.com have crossed the threshold as the first trillion-dollar U.S. companies, GE’s market capitalization has shrunk to $100 billion.
“You need to adapt and evolve when you are a large company,” Feinseth said. “GE adapted and evolved, but in the wrong direction.” All told, GE has lost about a half-trillion dollars in value since Welch retired in 2001. Welch handed off to Jeffrey R. Immelt, on whose watch GE stumbled as the worst-performing stock in the Dow Jones industrial average among companies that had not gone bankrupt. This year GE, the only remaining original member of the Dow, lost its spot on the blue-chip benchmark to Apple.