GE Oudes CEO John Flannery is going to be surprised after missing goals

GE has warned that it will miss its profit and cash targets for 2018. GE has also announced plans to assume accounting charges of up to $ 23 billion for its electrical business, which manufactures turbines for power plants and who was suffering from weak demand.

A large part of the charge would be related to the acquisition in 2015 of the electricity business of the French group

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people familiar with the subject said. The agreement, which sought to increase GE's market share, had a negative effect on global demand for electricity generation. This left GE with factories filled with additional inventory and little money from customers.

The GE board has held a series of unplanned calls in recent days and has decided to replace Flannery, fearing he will not move fast enough to deal with the company's problems, according to people close to the situation. Culp is expected to continue his strategy of splitting GE's health care sector and selling two other large units, said the people, leaving the company focused on its power and aviation units.

The jury's concerns about 57-year-old Flannery were hit hard when they learned last week about the potential charge, the people said. "It was a bit of a last ditch," said one person. In January, Flannery surprised investors and directors when GE revealed a $ 15 billion reserve deficit for a traditional insurance company.

Several GE directors, particularly the recent additions, and some of the company's management, have been frustrated in recent weeks by the slow progress of the dissolution plan, say people familiar with the case. Investors and customers have been informed of similar concerns, they said.

After a meeting on Wednesday, the council first contacted Mr. Culp to ask him if he was willing to accept the job. the council officially informed Mr. Flannery over the weekend of the change, said the people. One of the concerns expressed by the directors was the feeling that GE's bureaucracy had created slowness, which is why the board opposed a third party.

The activist investor Trian Fund Management, who took a significant stake in GE in 2015 and sits on the board of directors, has long admired Danaher for his performance and his desire to create businesses.

GE refused to put MM. Culp and Flannery at their disposal for interviews.

GE was once a symbol of US manufacturing power, but struggled after the financial crisis forced the company to reduce its activity as large lenders and recently faced the weak performance of its industrial units. Earlier this year, GE had announced that it would essentially separate by selling three major units: health care, transportation, oil and gas.

Although GE was removed from the Dow Jones Industrial Average in June, the 126-year-old company remains among the most widely held stocks in the United States.

Mr. Flannery, a GE veteran, was appointed to lead the company in June 2017 after the resignation of longtime CEO Jeff Immelt on August 1, under shareholder pressure. Flannery's dismissal Monday surprised some members of the company, who had anticipated the possibility of changes in leadership given the difficulties of the electricity sector – but not a departure from the CEO.

Mr. Flannery joined GE in 1987 and has spent most of his career at GE Capital, a financial services company. Like many GE executives, he has worked around the world, including leading GE business in India. He took charge of the health care unit in 2014, a position he headed until he won the competition to succeed Mr. Immelt the following year. last year.

After winning the position, Flannery began a month-long review of the company, a pace that has frustrated some on Wall Street because of the big questions about GE's financial forecast and outlook. He provided an update in November 2017 that overwhelmed investors.

After another review and the restructuring of the April Board, Flannery detailed in June a new strategy focused on the energy and energy sectors.

People outside the company have asked Mr. Flannery to also present a vision for the future. While the new CEO often sought advice, the differing opinions sometimes made it more difficult for him to make a final decision, according to the people who worked with him.

Mr. Culp, 55, is the first foreigner to hire GE, who has the habit of training his own leaders and letting them run the company for long periods. Former CEO Jack Welch was president and CEO for 20 years, while Immelt led GE for 16 years, going through ups and downs.

Messrs. Welch and Immelt both discussed the change of CEO on Monday, thanking Flannery for his contributions and congratulating Mr Culp.

Mr. Welch said that Mr. Flannery had inherited a business with "a very difficult track record" but had been striving to define a "new direction".

Immelt said the new management team could solve the recent problems in the energy sector. "It's a company that generates strong earnings and cash flow for many years," he said. "He will recover and regain market leadership."

Mr. Culp was CEO of Danaher from 2001 to early 2015, when he was only 37 years old. Passionate about lean manufacturing and deal, he led the conglomerate through several major acquisitions. During his term, the total shareholder return was 465%, compared to approximately 105% for the S & P 500 over the same period.

Although much smaller than GE, Danaher under Mr. Culp has often been relied on as a model of what a successful conglomerate could be: a narrowly focused portfolio of business units whose overlapping interests were well understood by investors.

He joined the group as part of a redesign that brought the board of 18 people to 12 and removed many of the older directors. The current board of directors includes Trian's co-founder, Ed Garden, and former American Airlines general manager, Thomas Horton, who was appointed Monday as an independent director.

The new CEO spent his first day at the company's headquarters in Boston, calling for investors, and he should act quickly to reinforce the plan to dissolve the June board, for which he voted as director, said the officials. "He feels like he owns this plan," said one person.

-Ted Mann
contributed to this article.

Write to Thomas Gryta at [email protected] and David Benoit at [email protected]