After just one year on the job, John Flannery was removed as the chairman of General Electric on Monday, reports CNBC.
Flannery was replaced by the former Danaher CEO Lawrence Culp immediately, with the board citing frustration at how slow change in the company had been under Flannery’s leadership. Flannery had been unable to reverse the fortunes of the struggling giant.
Following the news, GE shares, which hit a new nine-year low last week, bounced, jumping up 13 percent almost immediately after the announcement. The stock price leveled out slightly but is still trading above 10 percent where it could stay at closing today. The 13 percent raise almost doubled the losses from last week, with the company trading as low as 7 percent down.
Along with the announcement of Culp replacing Flannery, GE announced that they would be taking a $2.3 billion noncash charge for the power business. The statement also confirmed what many on Wall Street had forecast.
“[GE will] fall short of previously indicated guidance for free cash flow and EPS for 2018.”
Culp’s rise to the CEO position has been quick. He only joined the board of the company in April, and his appointment to the GE board came after he served as Danaher’s CEO. At just 37, Culp became the CEO at Danaher and served there until 2014, significantly growing the science and technology company five-fold in his tenure.
Flannery was appointed after GE’s stock price was steadily falling under former CEO Jeff Immelt, and Flannery came in with a turnaround plan. But with a dividend cut on November 13 to 12 cents a share, down from 24, investors have been unconvinced that the plan will work.
By far the biggest sign of GE’s decline occurred in June 2017 when it was removed from the Dow Jones Industrial Average, which checks the average health of the stock market. Until that point, the company had been the longest running member of the average, serving there for 111 years.
Some of the issues faced by GE in the past year were things that a CEO could not do much about, the power business faced consistent roadblocks, highlighted by a broken turbine blade at a power plant in Texas.
The power business has struggled with GE misreading the market and being unable to sell enough turbines to traditional power plants while trying to switch to green energy. GE started its switch to green energy later than many other energy companies, leaving it with lots of unsold equipment.
With operating cost cuts made, Culp will have a lot of work to do but the market is clearly optimistic that he has the ability to turn things around.