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. Culp said in a statement, "We have a lot of work ahead of us to unlock the value of GE".
GE shares are up more than 10% on the news.
In hiring Mr. Culp, 55 years old, GE brought in a leader who ran what some investors saw as a model industrial conglomerate. On behalf of the board, I thank John for his significant contributions and long service to GE. "I am excited to get to work". GE now expects to miss its 2018 earnings forecast and take an impairment charge for nearly all of the US$23 billion of goodwill associated with its power segment.
GE Power's current goodwill balance is about $23 billion and the goodwill impairment charge is likely to constitute substantially all of this balance, the company said.
The board's move comes in a little more than a year after it appointed Flannery as GE's chief executive.
The company said Monday that H. Lawrence Culp Jr. will take over as chairman and CEO immediately. The problems deepened in the past two years as GE faced cash-flow shortfalls, slumping demand and investigations by the U.S. Securities and Exchange Commission.
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GE, however, has not seen such gains, particularly when it comes to its power business which was hit by problems with its latest generation of gas turbines and posted a $10 billion loss previous year.
GE traces its roots to Thomas Edison and the invention of the light bulb, and the company grew with the American economy.
"We will have to see the magnitude of Power profit reset to quantify the risk of a capital raise but note that elimination of dividend frees up $4 billion/year".
'We remain committed to strengthening the balance sheet including de-leveraging'.
(Neutral, price target $13) GE's "press release signals kitchen-sink is coming". "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".