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03 October 2018, 10:41 | Melissa Porter
General Electric boss exit and $23bn hit stun Wall Street
Lawrence Culp, Jr. has been named chairman and chief executive officer by a unanimous vote of the GE board of directors, effective immediately.
Mr Flannery replaced long-serving boss Jeff Immelt in August 2017 after investors grew impatient with the company's flagging share price.
Flannery on the same day said that GE might take the radical step of splitting up the main company's three main components - aviation, health care and power - into separate businesses.
The company's shares rose 15pc before the opening bell.
The broad strategies are likely to be similar because the plan laid out by Mr Flannery was made in conjunction with heavy involvement from the board, which included Mr Culp, said Gabelli & Co analyst Justin Bergner.
Equipment and industrial analyst Stephen Tusa reiterated both his underweight rating and $10 price target on GE shares Monday, telling clients that investors may be wrong to celebrate the switch given the suspicious timing.
The once mighty conglomerate, long a standard-bearer of USA 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.
Flannery's departure from GE is driven by "slow pace of change" under his leadership, CNBC reported, citing a text from a source.
GE said there would be a substantial write-down of the $23 billion of goodwill associated with the power unit, whose prime business is producing large natural-gas turbines for electric utilities around the world.
The power division's outlook appeared to worsen last month when GE said several power plants equipped with its newest turbines had to be shut down because of a part failure. Currently, the goodwill balance of GE Power is about $23 million.
"We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency, " Culp said in the statement.
Since achieving a peak market cap of $US594 billion way back in August 2000, GE has seen its value tumbled by nearly $US500 billion. Its close touched a nine-year low "as recently as last Tuesday, while the Dow Jones Industrial Average has rallied 20.5 percent", noted the market news site.
"Uncertainty regarding near-term EPS and capital structure profile offsets long-term upside from turnaround under new CEO Larry Culp". According to GE's press release, Culp led Danaher to increasing its free-cash flow five-fold during his tenure.
The CEO move was not enough for Jim Corridore, director of industrials equity research at CFRA Research, to recommend investors buy GE stock. 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.
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