Published: Tue, October 02, 2018
Business | By Eloise Houston

Lawrence Culp, new GE CEO, faces tall task reviving aging conglomerate

Lawrence Culp, new GE CEO, faces tall task reviving aging conglomerate

The average tenure for a CEO at the company, which was once renowned for grooming executives to run major corporations including Boeing, Home Depot and Honeywell, was almost 14 years prior to Flannery's swift exit.

GE's board, meeting in the last few days, unanimously picked H. Lawrence Culp Jr as its new CEO.

The company has recruited two renowned turnaround experts to replace Mr Flannery.

Just six months after taking over as CEO, Flannery said the company would be forced to pay $15 billion to make up for the miscalculations of an insurance subsidiary.

Shares of GE last week hit a nine-year low, after news of a glitch in new power-plant turbine technology that temporarily shut two electricity plants in Texas - adding to woes in the company's industrial segments. That will leave it focused on areas such as jet engines, power plants and renewable energy.

Flannery on the same day said that GE might take the radical step of splitting up the main company's three main components - aviation, health care and power - into separate businesses.

GE said it will take a $23 billion goodwill charge for its power business. But investors seemed unimpressed, and the stock kept falling even as USA markets notched records. He's already a member of GE's board. It even dumped the lighting business tied to the company's iconic founder, Thomas Edison.

In hiring Mr. Culp, 55 years old, GE brought in a leader who ran what some investors saw as a model industrial conglomerate.

"Under Culp, investors may be willing to look further out to assess what GE may be worth post the planned portfolio moves, which may sustain the bounce in the stock that we expect today".

"With Larry what GE shareholders get is an outsider who will likely strip corporate back to necessary functions and tear down all the fiefdoms that prior management (Immelt) had built up", he wrote. "However, these problems were not created under [Flannery's] tenure", CFRA analyst Jim Corridore said in a note. "We see a significant cut to dividend earlier than previously expected". Capital allocation can include decisions like stock buybacks, acquisitions, and research and development spending.

"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.

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.

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