Turning a big ship takes time, but GE lost faith in its captain.
The board ousted CEO John Flannery Monday and replaced him with Lawrence Culp, the former CEO of Danaher Corporation, a publicly traded technology manufacturing conglomerate. The dismissal ended Flannery’s push to modernize GE after just a year in office.
The company’s stock price leaped 15 percent after the announcement Monday morning, before coming down from that spike.
GE’s empire spans electric power, transportation, aviation and healthcare. The century-old company has strived to reposition itself as a “digital-industrial” powerhouse.
That effort is complicated by ongoing market shifts. The growth of wind and solar plants has cut into global demand for thermal plants; as one of the world’s largest manufacturers and servicers of turbines for electrical generation, GE has been hard hit by that trend.
Growth in the company’s newly reinvented energy storage business, renewable generation and digital grid services has not reached the point of substituting for the conventional power revenues.
With most of GE’s divisions performing on track with expectations, setbacks in GE Power will drag down the overall company’s free cash flow and earnings per share this year, GE said in a statement.
The company also announced that the Power division may take a $23 billion “goodwill impairment charge,” a mechanism whereby companies settle the differences between the actual value of assets and the premium paid to acquire them.
Flannery’s primary task when he took the reins in August 2017 was to streamline the sprawling corporate empire and set it up for continued financial health.
Before taking the helm from long-time CEO Jeff Immelt, Flannery led GE Healthcare and served in GE Equity, GE Capital and the company's India operation. While running business development at GE Corporate, he spearheaded the acquisition of Alstom's power business, which doubled GE's installed power base and strengthened its renewables portfolio.
He brought familiarity with many of GE’s flagship business units, but that alone would not suffice. Flannery cut the blue chip stock’s dividend in half last year.
As September rolled around, board members were frustrated with what they saw as a “slow pace of change,” CNBC reported.
Flannery’s short tenure stands in contrast to Immelt's 16-year run before him. Culp, the new CEO, led Danaher for 14 years until 2014.
In its statement, GE praised him for growing Danaher’s market capitalizations and revenues five-fold.
“During his tenure he led the highly successful transformation of the company from an industrial manufacturer into a leading science and technology company,” the statement said.
GE accompanied the dramatic boardroom intrigue with two other bits of news: that GE Power will supply a new gas plant in Bangladesh, and that GE’s HA turbine technology appears in two plants chosen for Power Magazine’s “Top Gas Projects for 2018.”
That industry publication honor may provide a measure of solace as GE Power employees contemplate a newly tumultuous future.