Immelt to depart as GE names new chief executive

NEW YORK: General Electric announced a leadership shakeup on Monday (Jun 12) as it faces scrutiny after a corporate makeover executed by outgoing chief Jeff Immelt in the wake of the 2008 financial crisis failed to ignite strong growth.

General Electric's Jeff Immelt who led the US giant since 2001 will hand his chief executive position over to John Flannery on Aug 1. (AFP/SAJJAD HUSSAIN)

Immelt, 61, will step down as chief executive on Aug 1, handing the reins to GE Healthcare president John Flannery, a 30-year veteran of the company whose previous roles included country chief in India.

During a conference call with analysts, Immelt said the transition was first discussed in 2013 and GE leadership had targeted summer 2017 to make the change.

But the announcement also comes after activist investor Nelson Peltz, one of the most influential voices on Wall Street, invested in GE, which has been hit hard by the plunge in oil prices. Peltz has pushed GE to deepen cost cuts to boost profits.

Questioned by analysts on the merits of GE's conglomerate model, Flannery, 55, pledged he would undertake "a comprehensive review of the portfolio," with an update in the fall.

But he said he had seen firsthand the benefits of GE's diverse structure while leading the health care division, during which he "borrowed" from the company's technology and global supply chain.

"I see the reality of this in a very tangible way all the time," Flannery said.

The GE transition comes three weeks after Ford abruptly changed chief executives. Others, including Honeywell International and Caterpillar, also have announced new leaders over the last year as traditional industrial companies seek new chiefs to help them adapt to an increasingly digital economy.

MIXED LEGACY

Immelt's 16-year tenure began shortly before the Sep 11, 2001 attacks on the United States and was also roiled by the 2008 financial crisis.

In the aftermath of the financial crisis, he oversaw a spate of large divestments from GE Capital to unload what was effectively the fifth biggest US bank.

Immelt, who succeeded the legendary Jack Welch, also led GE through the 2015 purchase of the power assets of French industrial giant Alstom, and a proposed merger with oil services company Baker Hughes engineered to better manage the effects of a two-year slide in oil prices that has dented GE's oil services earnings.

On Monday, US antitrust officials ordered GE to divest a unit that sells chemicals to oil refineries as a condition of winning regulatory approval.

Immelt also has taken steps to beef up GE's technology businesses, including by investing in the 3D printing, which is seen as a growth area.

Despite these efforts, analysts have a mixed views of Immelt's tenure.

"We continue to believe that any new leader here needs a material reset," said JPMorgan Chase analyst C. Stephen Tusa, Jr.

"We are all ears on the new narrative," Tusa said, adding that Flannery will be constrained from making radical changes that could threaten the company's dividend.

CFRA analyst Jim Corridore said while Immelt "should get credit for transforming GE away from consumer finance," the pace of change "has been slow and the company has had execution challenges."

Still, he added, "We think GE remains on the right track with its strategy and expect share performance to improve in the coming year."

Flannery praised Immelt's leadership, saying the changes he made took "courage" and the company now is "clearly better positioned" in its markets because of the outgoing leader's efforts to simplify operations.

Even so, there are "clearly areas where we need to be better," Flannery said. "There are clear areas of concern around cost structure."

GE shares had been down nearly 13 per cent in 2017, but Monday they rose 3.6 per cent to close at US$28.94.

Source AFP