There’s $US500 billion missing at General Electric, or that’s the market value of Facebook or half that of Apple.
The fall of the once mighty General Electric continues with the CEO of the past year and a bit ousted on Monday and an impairment charge of another $US23 billion on top of more than $US21 billion in losses and extra charges revealed earlier this year, but taken against 2017 in some cases.
The shares jumped 7% afterward but the company’s market value remained just under $US100 billion at just over $US98 billion. – the lowest for decades.
In fact, the shares remain down more than 30% so far in 2018 and over 51% in the past year as more than a decade of incompetent management, market changes, and weak oversight have caught up with the company which at one stage was worth $US600 billion in 2000!
And if the new CEO has its way, GE will shrink even further to become the dark dwarf of US ’star’ companies – overshadowed by the new giants like Alphabet, Amazon, and Apple. But without the jobs – GE still employs over 300,000 people.
Monday saw General Electric replace chief executive John Flannery just over a year into his role, as the company shocked investors before trading started with that news and an impairment hit of up to $US23 billion to the value of goodwill in one of its core divisions, supplying equipment for power generation. GE said the write-down will cut “substantially all” of GE Power’s current goodwill balance of about $US23 billion.
Mr. Flannery, whose time at the helm of the American powerhouse was the shortest of any leader in its 126-year history, saw the company’s share price crash more than 50% on his watch.
GE said it named board member H. Lawrence Culp Jr. as its chairman and chief executive, effective immediately, succeeding Mr. Flannery. Culp previously served as CEO of Danaher Corp (another US manufacturer) from 2000 to 2014.
GE also said it will miss previously provided guidance for free cash flow and earnings per share in 2018 because a weak performance in its power business which will more than offset steady performances in its other businesses.
In January GE announced a 2017 fourth quarter after-tax charge of $US6.2 billion and a $US3 billion cash capital contribution to its insurance subsidiary that will grow to $US15 billion by 2024.
The latest write-down and departure of Mr. Flannery came after GE revealed problems with blades for its latest gas turbines used for electricity generation which had forced one power company to shut down a station.
But analysts say these problems at its power division reflect more fundamental issues. GE has for years has specialised in equipment for gas-fired power stations of all sizes, which has been squeezed by the rise of low-cost renewable energy, weak electricity demand growth in developed countries, and the persistence of competition from coal in Asia.
In June Mr. Flannery launched a plan to turn GE into essentially a two-sector company, in aviation and the power industry.
The healthcare division will be spun off, and the controlling 62.5% stake in Baker Hughes, the oilfield services group, is to be sold. Statements on Monday from the company said that plan remains on course.
