GE Ousts Flannery After Slump, Names Lawrence Culp CEO

(Bloomberg) -- General Electric Co. soared after shocking investors by naming Larry Culp chief executive officer and chairman, ousting John Flannery amid a severe share decline.

Culp, who is highly respected on Wall Street for a successful transformation of Danaher Corp., will take over immediately, just 14 months after Flannery took the reins. Thomas Horton was named lead director.

“GE remains a fundamentally strong company with great businesses and tremendous talent,’’ Culp said Monday in a statement. “We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency.”

GE also said it will take an impairment charge constituting nearly all of the $23 billion of goodwill associated with its power segment, which has struggled with a downturn in the gas-turbine market. As a result, the Boston-based company now expects to miss its free cash flow and earnings forecasts for 2018.

The shares climbed 8.2 percent to $12.22 in New York premarket trading Monday. GE had fallen 35 percent this year through Friday, following a 45 percent decline in 2017.

Key Insights

• Culp won praise for transforming Danaher and is seen as bringing that experience to GE, which has been floundering for two years.
• Flannery has been unable to stanch bleeding at GE. About a half-trillion dollars in market value wiped out since an all-time high 18 years ago. The iconic American corporation was worth just under $100 billion as of the close Sept. 28, its stock at around $11.
• The 9/11 terrorist attack badly hurt its jet-engine and insurance businesses, but the last couple of years have been particularly brutal.
• The shares fell 45 percent in 2017 after cash-flow shortages and weak sales in its power unit, among other factors. They’ve crashed another 35 percent so far this year.

Shares Climb

GE shares surged 13 percent to $12.75 in New York premarket trading Monday.

Key Details

• Company says it will fall short of previous guidance for 2018 free cash flow and EPS. Company forecasts: free cash flow, $6 billion to $7 billion; adjusted earnings, $1 to $1.07 a share.
• Culp also named chairman. Thomas Horton named lead director. Both have been on board since April.
• Culp, 55, served as CEO of Danaher Corp. from 2000 to 2014, leading transformation of the company from an industrial manufacturer into a science and technology company.
• Horton, 57, served as CEO of American Airlines from 2011 to 2013 and chairman from 2013 to 2014.

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