The following is an excerpt from MATTHEW ZEITLIN | October 1, 2018 | Slate.com |
The 2000s haven’t been a good century for General Electric. The company’s consistent earnings growth of the previous century disappeared after the departure of legendary chief executive Jack Welch (and the company’s creative accounting), its massive financial operations were hammered by the financial crisis, and it’s been going on a campaign of retrenchment and shrinkage—even shedding its iconic appliance business—all the while seeing its market value drop around $500 billion in the past 17 years and around $100 billion in the past year.
That helps to explain why John Flannery, who succeeded previous CEO Jeffrey Immelt just last summer, was unexpectedly canned Monday by the company’s board. The perhaps more surprising—and welcome—news was that the stock then jumped about 13 percent at opening.
But you can only fire the chief executive and see your stock pop so many times.
The boost was despite GE also disclosing Monday that it was taking a $23 billion charge from its power business, which primarily makes equipment like turbines and generators for power plants. Because of the weakness in its power business, which makes up almost 30 percent of its total revenue, the company said that it would miss its already reduced cash flow and profit forecast for this year. That unit had already seen its annual revenues drop 2 percent and its profits fall 45 percent as GE absorbed a massive acquisition of the French company Alstom’s power business in 2015.
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