General Electric Co Chief Executive Officer John Flannery abruptly stepped down on Monday just over a year after taking the role, as the company warned it would fall short of its 2018 earnings guidance due to cash flow issues in its GE Power division.
The company also announced that while other parts of the company are in line with earlier guidance, plans now call for a non-cash goodwill impairment charge related to the GE Power business - essentially wiping out a $23 billion goodwill balance. GE will need to take a goodwill impairment charge of almost all the $23 billion in its goodwill balance, according to the company.
H. Lawrence Culp, named to the GE board in April, will replace Flannery immediately, the firm said in a statement, following a unanimous decision of the board.
Some analysts said that GE Power likely missed financial targets for the third quarter, contributing to Mr Flannery's ouster. GE was worth as much as $600bn in the mid-2000s, making it one of the most valuable companies in history.
"It is a privilege to be asked to lead this iconic company", Culp said in a statement Monday.
"Investors will view the change favorably given Culp's successful CEO tenure at Danaher, his GE "outsider" status, and the fact that Culp doesn't "need" the position, having already completed a lucrative & reputable career".
GE is scheduled to report earnings October 25th before the market opens.
As September rolled around, board members were frustrated with what they saw as a "slow pace of change", CNBC reported.
GE doubled down on fossil fuels in 2015 under Immelt with the $10.3-billion purchase of French group Alstom SA's power business. Flannery was unable to right the ship.
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. "GE is bloated and its culture is destroyed".
Analysts noted that despite the seemingly good news, GE still has its work cut out for it. That deal gave GE more exposure to older coal plant technology at a time when coal plants were being shut down as too costly. General Electric is jumping after it said it will shed its health care business and its majority stake in oil services company Baker Hughes over the next few years. The company was expelled this year from the Dow Jones Industrial Average. "However, these problems were not created under [Flannery's] tenure", CFRA analyst Jim Corridore said in a note.
A goodwill impairment charge is a write-off used to balance a company's books when the recorded value of an asset or liability is determined to be greater than the fair value, according to Investopedia.