General Electric (GE) appointed Lawrence Culp, Jr., the current board member of GE, as its new Chairman and CEO, with immediate effect. He will be replacing the outgoing John Flannery who served the company as Chairman and CEO for about one year. After the announcement, GE shares rose about 15% in the pre-market trading and were up about 12% during the first hour of the regular trading session.
The board selected Larry Culp, who served as CEO of Danaher Corp (DHR) between 2000 and 2014, unanimously. Also, the board appointed Thomas Horton, the former CEO of American Airlines (AAL), as lead director. Both Culp and Horton were serving as the GE board members since April 2018. During Culp’s 14-year tenure at Danaher, the firm transformed from an industrial manufacturer to a leading science and technology company and its market cap and revenue grew five-fold.
The company also stated that it would fall short of previously targeted 2018 free cash flow and EPS outlook due to the dismal performance in the GE Power business. In addition, GE expects to take non-cash goodwill impairment charge related to the GE Power business.
GE Power’s current goodwill balance is approximately $23 billion, and the goodwill impairment charge is likely to constitute all of this balance substantially. GE is expected to give more clarity on this goodwill impairment change when it announces third-quarter results on October 25.
The board was not happy with the company’s performance especially in the last one year under the leadership of John Flannery, who has been appointed as CEO and Chairman from August 1, 2017. Shares of GE have been trading between $11.21 and $24.89 in the past 52 weeks. Last Wednesday, the stock plummeted to a nine-year low of $11.21, and it had dwindled about 27% and 47% in this year and past one year, respectively.
The company had expected the power market to remain challenging. General Electric had plans for separating GE Healthcare into a standalone company over 12 to 18 months, pursue the orderly separation of BHGE over two to three years and combine GE Transportation with Wabtec. Shares of Baker Hughes (BHGE), a GE company, were down about 0.5% during the first hour of trading.