Struggling conglomerate appoints new CEO.
In a surprise move Monday, General Electric ousted Chief Executive Officer John Flannery, replacing him with outsider and board member Larry Culp.
The struggling energy, health and transportation conglomerate said it would fall short of its forecast for free cash flow and earnings per share for 2018 due to weakness in its power business, something expected by industry analysts.
GE shares jumped 14 percent to $12.88 in early trading as investors bet Culp could rejuvenate the GE brand and act more quickly in transforming its portfolio.
The shares had dropped more than half since Flannery became CEO in August 2017, replacing Jeff Immelt, who had led GE since 2001.
With a market capitalization below $100 billion as of last Friday, GE was worth less than a fifth of its peak value a generation ago.
The tumbling profits of GE Power, in particular, last year forced GE to slash its overall profit outlook and cut its dividend for only the second time since the 1930s.
Incoming CEO, H. Lawrence Culp Jr, 55, was named to GE’s board in February, and previously served as CEO of Danaher Corp from 2000 to 2014, helping grow an industrial company into a broader conglomerate through a series of key acquisitions.
GE doubled down on fossil fuels under Jeff Immelt with the $10.3 billion purchase of French group Alstom SA’s power business. The deal expanded GE’s access to gas, coal, and nuclear power, yet it also added employees, factories, and service centers at a time when the company was trying to cut costs.
The outlook for GE’s power division worsened last month when the company said several power plants equipped with its newest turbines had to be shut down because of the failure of one of their components. That comes after the power business posted a $10-billion loss last year.
General Electric said in June it will spin off its healthcare business and divest its stake in oil services firm Baker Hughes, effectively breaking up the 126-year-old conglomerate, once the most valuable corporation in the US. The newly streamlined GE will focus on jet engines, power plants and renewable energy.