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General Electric ditches boss John Flannery and takes $23bn hit

02 October 2018

In June GE said it would spin off its health-care business and sell its interest in Baker Hughes, a massive oil services company.

Wall Street, for today at least, agreed - GE shares rose more than 10 percent Monday. They were the top percent gainer on the S&P 500, set for their best day since March 2009, but still far lagging the S&P this year.

Mr Flannery had only been in the post since August 2017, when he succeeded Jeff Immelt, who had been in the job for 16 years.

GE has been hobbled by years of poorly timed deals and needless complexity.

In addition to adding Mr Culp to the board, GE also appointed Thomas Horton, the former chief executive of American Airlines and AT&T, as lead director - citing his experience with corporate restructuring in the merger of American and US Airways.

After less than two years and a precipitous decline at General Electric, John Flannery has been ousted as chairman and CEO at the century-old company.

GE plans to provide more financial information in conjunction with its third-quarter earnings release due on October 25.

"I think what (Culp) will bring is sort of external mindset into the organization and particularly the ability to run a decentralized company very effectively, given that was sort of the way in which things were done at Danaher".

"GE remains a fundamentally strong company with great businesses and tremendous talent, " Culp said Monday in a statement.

Culp joined the GE board in April.

Flannery's departure underscores the slow pace of his efforts to turn around GE.

The once mighty conglomerate, long a standard-bearer of U.S. industrial preeminence, is still working to right the ship following the global financial crisis of a decade ago, which blew a hole in GE's once-massive lending business. That comes after the power business posted a US$10-billion loss past year. Those included the purchase of French gas-turbine maker Alstom, which GE bought in 2015 for more than $14 billion.

Changing CEOs "won't fix short-term problems at power but Larry, as an outsider, will be able to make the hard decisions on cost", said Scott Davis, an analyst at Melius Research in NY.

Davis said the stock price has probably already adjusted to expectations of no contribution from power.

Recently, investors and other members of the financial community have been concerned about John Flannery's ability to lead GE as the company seems to be headed in the wrong direction.

The power generation business has been particularly weak in recent years, due in part to the growth of renewable energy sources that has dented demand for GE's turbines.

General Electric ditches boss John Flannery and takes $23bn hit