General Electric Co. (Boston) is an industrial giant that traces its lineage back to Thomas Edison. This week, however, GE’s prospects continued to dim.
The company changed CEOs, dumping John Flannery after a little more than a year on the job. The company also plans to write down the value of its troubled GE Power unit by about $23 billion.
The business makes turbines for power plants. GE said in its second-quarter earnings report the unit’s orders of $7.4 billion were down 26% and its revenue slid 19%.
Flannery last year succeeded Jeff Immelt, who had been in the shadow of his predecessor, Jack Welch. Welch had been an early celebrity CEO. He popularized concepts such as Six Sigma. He also implemented a ruthless corporate culture, where the bottom 20% of employees were targeted to be forced out.
GE changed CEOs because its stock price continues to lag. Under Immelt, GE divested financial assets and NBC to concentrate on being a more-focused industrial company. Flannery got the nod to make GE more efficient and profitable.
The now-departed CEO announced in June the company would concentrate on aviation, power and renewable energy.
Nevertheless, GE’s board decided Flannery wasn’t getting the job done. So it tapped director H. Lawrence Culp Jr., 55. Culp is a former CEO of industrial company Danaher Corp. and joined GE’s board since last year. He got credit for revamping Danaher into more of a science and technology concern. GE’s board is counting on Culp to perform another transformation.
Moody’s Investors Service, said today it was reviewing GE’s debt for a possible downgrade. Moody’s long-term rating is A2, the sixth-highest rating. The power unit was one reason for the review.
The “prospects of the continuing deterioration in its Power business…is likely to persist for some time,” Moody’s said in a statement. “The change in GE’s CEO and chairman was an additional consideration for the review.” Culp also will be chairman in addition to CEO.
The company’s image has been dimming for a while. Earlier this year, there was a symbol of that. The Dow Jones Industrial Average removed GE, replacing it with Walgreens Boots Alliance, the drug store chain.
One sector that will be watching Culp closely is the additive manufacturing industry. GE has invested heavily in 3D printing. It has adopted additive manufacturing in aviation.
Companies such as GE and HP Inc. are supposed to accelerate the use of the technology in manufacturing. So there’s plenty of interest among 3D printing players.