General Electric ditches boss John Flannery and takes $23bn hit

General Electric ditches boss John Flannery and takes $23bn hit

Apple became the first US-based company to reach $1 trillion in valuation in August, according to CNBC.

In Culp, GE is tapping a former head of another industrial company, Danaher Corp (DHR.N).

Flannery's departure comes as he was trying to turn around GE, including through a series of major planned divestitures from the sprawling company.

GE named Culp to replace Flannery as it warned the company would fall short of recent forecasts for cash flow and profit growth, citing the weak performance of its power division. GE Power's current goodwill balance is approximately $23 billion and the goodwill impairment charge is likely to constitute substantially all of this balance.

U.S. stocks are set to head higher at the open, with General Electric Company (NYSE:GE) leading the charge. It was replaced by the parent company of the Walgreens pharmacy chain.

GE, however, has not seen such gains, particularly when it comes to its power business which was hit by problems with its latest generation of gas turbines and posted a $10 billion loss past year. The company has been forced to sell off divisions and lay off employees, a process that accelerated under Flannery. But investors seemed unimpressed, and the stock kept falling even as USA markets notched records.

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. Flannery announced his resignation today.

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What will Culp do next?

He previously served as CEO and president at the conglomerate Danaher between 2000 and 2014.

"Given the amount of portfolio change at the company and the prospect for further shifts in light of this news, one drawback is that shareholders do not know exactly what they will be owning in a year or two, but this factor has not stopped investors from trusting in portfolio changes at DHR and FTV". GE did not provide new guidance. In the release, the company said that the change in management will be effective immediately.

GE now pays an annualized dividend of 48 cents, resulting in a yield of 4%.

GE has been dogged by problems at its power division, which makes machinery for power plants and has struggled amid tepid demand. Capital allocation can include decisions like stock buybacks, acquisitions, and research and development spending.

"We fully expect him to do well, positive for long term investor confidence, but which we believe also means a proper reset to earnings and FCF construct and potential recapitalization to de-risk the balance sheet, all of which represent the most important 'shoes to drop, '" he said.

"We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency, " Culp said in the statement.

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