General Electric ousted chief executive officer John Flannery in a surprise move on Monday, replacing him with outsider and board member Larry Culp, and said it would take a roughly US$23 billion charge to write off goodwill in its power division, primarily from a large 2015 acquisition.
In addition to announcing Culp's ascension to the top spot, GE also said Monday that it may take a $23 billion goodwill impairment charge tied to its GE Power business and that it was going to miss its guidance targets.
GE Power's falling profits a year ago forced GE to slash its overall profit outlook and cut its dividend for only the second time since the Great Depression.
It remains committed to its spin-off strategy, he added.
Culp, the first outsider to be named chief executive of GE, led a turnaround at Danaher, where sales increased fivefold during his 14-year tenure.
He took over from veteran chief executive Jeff Immelt, who had led the USA industrial giant since 2001.
The company was booted from the Dow Jones Industrial Average this summer and, last month, shares tumbled to a nine-year low after revealing a flaw in its marquee gas turbines, which caused the metal blades to weaken and forced the shutdown of a pair of power plants where they were in use. We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency. "The changes that have taken place since Flannery's appointment have been relatively drastic with little financial results to show".
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Indeed, GE's revenue and profit has declined over the years, in part as GE has pulled back from finance and other businesses.
Flannery's response has included the sale of some assets and the elimination of more than 12 000 GE power jobs.
While GE's stock spiked as much as 16% on the news of Flannery's departure, the company's shares are still down 29% this year. The power unit, one of the key divisions within GE, has been experiencing some trouble with the blades on its new, giant H-class turbines that the company recently has sought to downplay.
Culp has won praise for transforming industrial conglomerate Danaher and is seen as bringing that experience to GE, which has been floundering for two years. Still, he said, that Danaher, under Culp's leadership, "saw strong growth in revenues and EPS, and hopefully he can right the ship at GE".
MarketWatch said he inherited the mistakes of his predecessor, including the $17 billion purchase of France's Alstom power business, and "paid the price for not cleaning up someone else's mess fast enough".
"Investors grew impatient with the lack of improvement and with the sheer scale of the problems uncovered; however, these problems were not created under his tenure", CFRA Research analyst Jim Corridore said in a note.