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.
The shares climbed 8.2 percent to $12.22 in NY premarket trading Monday.
The company's power business, hit by problems with its latest generation of gas turbines, posted a US$10 billion loss past year.
Speaking to Recharge last week in Germany, Pete McCabe, GE's chief executive for onshore wind, said there are still too many turbine OEMs in the global market, and he expects the number to shrink over the next few years as the global move away from renewables subsidies continues. The company said the charge, which is still being finalized, will likely total almost $23 billion.
General Electric ousted its CEO, took a $23 billion charge and said it would fall short of profit forecasts this year, further signs that the century-old industrial conglomerate is struggling to turn around its vastly shrunken business. It is a privilege to be asked to lead this iconic company, ' Culp said in the company's statement.
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"GE remains a fundamentally strong company with great businesses and tremendous talent", said Culp in a statement, adding that he and leadership "remain committed to strengthening the balance sheet, including deleveraging". Flannery worked to divest GE's interests in other operations and improve the company's increasingly poor performance. The stock has more than halved since he took the top job in August last year - about a half-trillion dollars in market value has been wiped out since an all-time high 18 years ago. Both Horton and Culp have been members of GE's board since April.
Over the last two decades, GE's valuation has dropped to just over $110 billion, down about $500 billion from its peak $600 billion in 2000 (which approximately equates to the current valuation of Facebook). Also, GE said that the Board has appointed Thomas W. Horton as the Lead Director of the company.
GE's board was unhappy with the pace of the company's turnaround under Mr Flannery, and when the size of the writedown in the power plant division, which makes electric generating equipment, became apparent, the board was persuaded to seek a new CEO, according to a person familiar with the matter who requested anonymity to discuss confidential deliberations. The aircraft engine business, where the company is dominant in both narrow- and wide-body engines, is GE's crown jewel.
"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". Flannery said he expected the power business to "remain weak through 2020."
In June, the Dow Jones Industrial Average cut the company from its 30-company stock index - a move that reflected its shrinking position in the United States economy.