GE fires chief executive and warns on profits

GE fires chief executive and warns on profits

GE fires chief executive and warns on profits

General Electric Co Chief Executive Officer John Flannery abruptly stepped down on Monday just over a year after taking the role, as the company warned it would fall short of its 2018 earnings guidance due to cash flow issues in its GE Power division.

In other boardroom news Monday, drugs behemoth Pfizer Inc (NYSE:PFE) saw its shares lose 0.18% to stand at $43.99 before the NY bell. 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.

GE said there would be a substantial write-down of the $23 billion of goodwill associated with the power unit, whose prime business is producing large natural-gas turbines for electric utilities around the world.

The board's move comes in a little more than a year after it appointed Flannery as GE's chief executive. The company said the charge, which is still being finalized, will likely total almost $23 billion.

The company also announced that while other parts of the company are in line with earlier guidance, plans now call for a non-cash goodwill impairment charge related to the GE Power business - essentially wiping out a $23 billion goodwill balance.

The company said on Monday that H. Lawrence Culp, Jr. would take over as chairman and CEO effective immediately.

Culp said in a statement, "We will move with urgency". The board looks forward to working with Larry and his team to return GE to growth and long-term success.

The stock jump is a sign from Wall Street "that Flannery's leadership was not providing enough value - and that the market expects Culp to be better suited for the top position", said Tim Hubbard, assistant professor of management in the University of Notre Dame's Mendoza College of Business. Thomas Horton was named lead director.

GE's board was unhappy with the pace of the company's turnaround under Mr Flannery, and when the size of the writedown in the power plant division, which makes electric generating equipment, became apparent, the board was persuaded to seek a new CEO, according to a person familiar with the matter who requested anonymity to discuss confidential deliberations.

GE remains a fundamentally strong company with great businesses and tremendous talent.

Culp, who served as CEO and president of manufacturing company Danaher Corporation from 2000 to 2014, may "inspire confidence in turn-around potential", UBS analyst Steven Winoker wrote in a note.

Some analysts said GE Power likely missed financial targets for the third quarter, contributing to Flannery's ouster. It was replaced by the parent company of the Walgreens pharmacy chain.

The hits keep coming for GE, which was removed from the bellwether Dow Jones industrial average over the summer.

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