cThe maker of jet engines, power plants, medical scanners and railroad locomotives on Monday named veteran insider John Flannery as its next chief executive. He takes over from Jeff Immelt who will step aside Aug. 1 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.”I’m going to do a fast but deliberate, methodical review of the whole company,” Flannery said in an interview with Reuters. “The board has encouraged me to come in and look at it afresh.”On a separate call with investors earlier, Flannery said “we’ll review each of those businesses in the portfolio, how it benefits and contributes to the broader company. And it’s something you can expect us to do with speed and with urgency and with no constraint.”Although not detailing specific plans, Flannery did say digital will be at the heart of GE’s strategy.GE has spent billions building a digital business that marries electronic sensors and powerful analytic computing to industrial equipment and has no plans to change that focus.”Digital is going to be a core aspect of the company for the next generation,” Flannery said.GE will make the results of the review public in the fall, but major changes are not needed, Flannery said. “We’re not starting from a weak position at all.”
Immelt, in the interview, said Flannery has a free hand to do what he wants. “There’s nobody more open to him driving change than me.” See related story: GE will press ahead with cutting overhead costs by $2 billion by 2019 and boosting profits to $2 a share next year. Flannery, a 55-year-old who joined the company 30 years ago and is now the head of its healthcare unit, will also become chairman after Immelt retires on Dec. 31.The company’s shares were up 3.8 percent at $29 as Flannery’s appointment ended six years of succession planning.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.Despite investing heavily on developing digital products, from sensors in jet engines to augmented reality software, shareholders have been wary of the company’s new direction. Since Immelt became CEO in 2001, GE’s shares have declined 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.