New G.E. CEO Has About Six Weeks To Clean Up 127-Year-Old Mess

The fire sale starts now.
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General Electric Chairman and CEO John Flannery is interviewed on the floor of the New York Stock Exchange, Tuesday, Nov. 14, 2017. (AP Photo/Richard Drew)

You do not want to be making this face in front of the board in a month. (AP Photo/Richard Drew)

In spite of the fact that he’d been with the company for three decades, it took John Flannery a full three months to be able to comprehend the scale of the tire fire that G.E. had become under Jeff Immelt’s watch. Larry Culp has been a G.E. director for six months or so, but it’s safe to say he has somewhat less time to fix all of the problems that have been festering and metastasizing for the better part of 20 years.

"The board was unsatisfied with the execution that was taking place under John Flannery's leadership," CNBC's Andrew Ross Sorkin said on "Squawk Box," citing sources…. The frustration among GE board members "hardened over the last several weeks," Sorkin said. Part of that frustration was "with the lack of concrete decision making made in a very short time frame," CNBC's David Faber added, citing sources.

That’s right, Larry: You can’t blow this stinking, steaming pile of trash up fast enough, as far as Nelson Peltz is concerned. Luckily, he thinks quite highly of your work in that area.

Activist investor Trian Fund Management, which took a large stake in GE in 2015 and holds a seat on the board, has long admired Danaher for its performance and willingness to spin off businesses….

A devotee of lean manufacturing and deal making, he led the conglomerate through several major acquisitions. In his tenure, total shareholder return was 465%, compared with about 105% for the S&P 500 during the same period.

Though far smaller than GE, Danaher under Mr. Culp was a frequently invoked as a model of what a successful conglomerate might be: a tightly focused portfolio of business units whose overlapping interests were well understood by investors.

In fairness to Flannery, he was ready to slice and dice G.E. into a billion more profitable parts himself, he just moved a little more slowly. In fairness to the people who just fired him, he was more than a little bit responsible for the mess, having championed G.E.’s disastrous Alstom acquisition as the company’s M&A chief. And while he was all too happy to rip his predecessor a new one whenever it seemed convenient, on the inside he sounded a little too much like the guy who had spent 16 years working closely with, which, you know, he was.

Flannery did deliver an aggressive breakup plan that included a spinoff of GE's health-care business, a divestiture of its Baker Hughes energy assets and a further shrinking of GE Capital. But the plan came almost a year into his tenure and was undermined by the continuing deterioration of GE's power business and lingering questions about the company's ability to meet leverage reduction goals.

Ultimately, Flannery's undoing may have been brought about by the same kind of stubbornness on financial projections that felled his predecessor, Jeff Immelt…. He was more frank with investors than Immelt was about the problems the company was having. But he still couldn't shed the old GE loyalty to financial targets. It's been apparent to many critics that GE's goals weren't credible since way back in January, when the company was forced to disclose a $15 billion reserve shortfall in a legacy insurance business.

On the bright side, Jim Cramer thinks Flannery got a raw deal. And it’s not like he really wanted the job in the first place, or enjoyed it in any way. It would have been nice if he’d gotten paid for his troubles and eventual humiliation.

GE Ousts CEO John Flannery in Surprise Move After Missed Targets [WSJ]
So Much for the John Flannery Era at GE [Bloomberg]
Why GE removed John Flannery as CEO after little more than a year [CNBC]
John Flannery was given a bad hand at GE, says Jim Cramer [CNBC]

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