General Electric on Monday removed John Flannery as CEO after only a year on the job, apparently reflecting the board’s loss of confidence in his ability to dig the troubled conglomerate out of a severe slump.
Flannery announced a plan to transform GE in November 2017 shortly after replacing Jeff Immelt but the company’s struggles continued under his watch, with the stock price diving more than 50%.
As GE announced he would be replaced by board member and former Danaher CEO Larry Culp, it also disclosed that its power business — a major contributor to the company’s declining fortunes — would take a non-cash $23 billion charge to write down the value of goodwill.
GE gave no explanation for Flannery’s abrupt removal but CNBC reported it was “driven by the board’s frustration with the slow pace of change under his leadership.”
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.”
“Basically, it’s like a coach being fired after one season, for losing with bad players signed and drafted by a previous regime,” the publication commented.
As part of his turnaround strategy, Flannery refocused GE on aviation and power, announcing plans to sell many of its other businesses, including its century-old railroad division, Thomas Edison’s light-bulb unit, Baker Hughes, and the health-care unit that makes MRI machines.
He also slashed GE’s dividend in half but according to CNN Money, “the makeover wasn’t fast enough to restore confidence among investors.” After the company in January disclosed massive losses in its legacy insurance business from its long-term-care portfolio, the stock slumped 15% over the next five sessions, the worst five-day stretch for the stock in nine years.
GE warned Monday that its 2018 profit will “fall short” of guidance because of “weaker performance” at its power division.
Culp, the first outsider to be named chief executive of GE, led a turnaround at Danaher, where sales increased fivefold during his 14-year tenure. GE’s shares jumped 7% in trading Monday.