By Arunima Banerjee and Alwyn Scott
General Electric Co on Monday named veteran insider John Flannery as its next chief executive, taking over from Jeff Immelt who is stepping aside after 16 years as the head of the conglomerate he helped steer through the financial crisis but is now worth a third less than when he took over. Under Immelt, GE sold off its finance, broadcasting, appliances and other units in order to focus on higher-margin service and software-related businesses and cut costs, but it failed to deliver profit growth as fast as some investors hoped. GE said John Flannery, a 55-year-old who joined the company 30 years ago and is now the head of its healthcare unit, will replace Immelt as CEO, effective Aug. 1, and as chairman after Immelt retires on Dec. 31."I want to start with a fresh look around the company overall and I think with a sense of urgency," Flannery said in a presentation broadcast live on Facebook. "There's so many things we do well and have always done well and there's clearly some areas we need to improve on and improve on quickly. No one's happy with the stock price right now or some of the cash pictures that we have had." The company's shares were up 3.5 percent at $28.92 as Flannery's appointment ended a six-year long succession planning program.Immelt, 61, who took over from Jack Welch in 2001, oversaw the divestment of its massive lending unit GE Capital and TV network NBCUniversal, shifting the conglomerate's focus away from finance and toward technology, healthcare and manufacturing.
GE has spent billions of dollars developing digital products, from sensors in jet engines to augmented reality software, but shareholders have been wary of the company's new direction.Since Immelt became CEO in 2001, GE's shares have fallen 30 percent, while the S&P 500 index more than doubled. That underperformance had some pressing for more urgency from Immelt.Activist investor Nelson Peltz's Trian Fund Management bought a stake in GE in October 2015, the largest single investment the firm had ever made, and now worth about $2 billion. Trian immediately pushed for asset sales and cost cuts. Trian declined comment on the CEO change on Monday.
GE said Immelt's departure was not triggered by outside influences, and that its board set the summer of 2017 for Immelt's departure as far back as 2013.Stifel analyst Robert McCarthy said the timing was not surprising because of the serial underperformance of the stock and "investor fatigue with management's continued perceived ungainly portfolio actions".During Immelt's tenure, GE bought French peer Alstom's power business and announced a deal to acquire oil and gas company Baker Hughes, while jettisoning the NBC unit and even its famed appliances division.
Still, the company - the oldest surviving member of the Dow Jones Industrial Average - has struggled to boost sales significantly in the past few quarters. In particular, the company's cash flow has been a cause for concern.Flannery, who joined GE Capital in 1987, focused on leveraged buyouts and later led the corporate restructuring group. He has also ran GE's India business, its equity business in Latin America and the GE Capital business for Argentina and Chile.Flannery has helped turn around GE's healthcare business, increasing organic revenue by 5 percent and margins by 100 basis points in 2016, GE said in a statement.The company said Kieran Murphy, president and CEO of GE Healthcare Life Sciences, will replace Flannery. (Reporting by Arunima Banerjee in Bengaluru and Alwyn Scott in Seattle; Editing by Saumyadeb Chakrabarty and Bernard Orr)
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Updated Date: Jun 12, 2017 21:13 PM