As the GE Power business outlook dives, the ailing industrial giant unexpectedly announced that CEO John Flannery is out after just over a year, and that H. Lawrence Culp Jr.is its new chairman and chief executive officer.
While John Flannery's tenure at the helm of General Electric (GE.N) was far shorter than that of his predecessor Jeff Immelt, the two former chiefs have one thing in common: They both presided over a sharp drop in GE shares.
The shares climbed 15 per cent to US$12.95 in NY premarket trading Monday.
GE has lost roughly $US500 billion in market value since August 2000, including a almost 30% hit to its stock price this year alone. GE will need to take a goodwill impairment charge of almost all the $23 billion in its goodwill balance, according to the company.
In an unexpected move, General Electric has replaced its chief executive just 16 months after appointing him.
MarketWatch said he inherited the mistakes of his predecessor, including the $17 billion purchase of France's Alstom power business, and "paid the price for not cleaning up someone else's mess fast enough".
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In a statement, Culp called his new position a "privilege" and said that he plans to "move with urgency" to address the company's woes. "However, we believe that CEO Culp will, at a minimum, re-baseline the company, drive execution and make long-term decisions that benefit the company and shareholders".
"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 has been hobbled by years of poorly timed deals and needless complexity that predate Flannery's tenure as CEO.
In June, Flannery made good on that promise when GE said it would spin off its health-care business and sell its interest in Baker Hughes, a massive oil services company. Culp has served on GE's board since April. He had promised to revamp GE into a leaner company by cutting jobs and shedding several businesses.
Flannery vowed to give GE more of a high-tech and industrial focus by honing in on aviation, power and renewable energy - businesses with big growth potential. Thomas Horton was named lead director. Culp, the new CEO, led Danaher for 14 years until 2014.
While the low-key Flannery won praise from some investors and analysts for candidness in comparison with the imperious Immelt, the company continued to miss key targets as its power business has continued to struggle. But shares have dropped almost 54 per cent over the past 12 months, and in June it was kicked out of the Dow Jones Industrial Average after 111 years on the blue-chip index.