GE’s new CEO vows change after ‘unacceptable’ results

Bloomberg

General Electric Co.’s new boss promised “sweeping change” as he delivered a brutal assessment of the 125-year-old manufacturer.
Results for the latest quarter are “completely unacceptable,” Chief Executive Officer John Flannery told investors as he slashed the profit forecast and pledged to unload $20 billion of GE businesses. “We need to make some major changes with urgency and a depth of purpose.”
Flannery, who took over Jeffrey Immelt’s longtime post less than three months ago, is plotting a dramatic overhaul at the maker of jet engines and ultrasound machines. Already, he has welcomed a representative of activist investor Trian Fund Management to GE’s board and announced major management changes. He’s seeking deeper cost cuts and investors are bracing to see if GE cuts its dividend for only the second time since the Great Depression. “Everything is on the table,” Flannery said on a conference call to discuss quarterly earnings. “Things will not stay the same
at GE.”
The new CEO, who will detail his plans to reshape the Boston-based company at an investor meeting November 13, is grappling with challenges from poor cash flows to slumping power-generation markets. GE is mired in one of the deepest slides in the company’s history and is the worst performer by far in the Dow Jones Industrial Average this year.
Flannery said he sees a path to recovery—and the comments registered with investors. After falling the most intraday in two years in early trading, the shares began erasing losses during the conference call and eventually turned slightly positive. GE rose less than 1 percent to $23.65 at 2:44 pm in New York.
“We have fundamentally good franchises,” Flannery said in a telephone interview. “There’s a lot of work to do, but we know what the issues are. They’re fixable.”

Profit Miss
Adjusted earnings this year are expected to be $1.05 to $1.10 a share, down from a previous range of $1.60 to $1.70 a share, GE said in a statement. Analysts had anticipated $1.54 a share, according to data compiled by Bloomberg.
GE reported a decline in adjusted profit to 29 cents a share for the third quarter, falling well short of the 50-cent average of analysts’ estimates compiled by Bloomberg. GE hasn’t missed estimates by more than half a cent in over nine years.
Earnings were hurt by restructuring and impairment charges, as well as a sharp decline in profit at the power-generation division.
GE cut $500 million in costs during the quarter, bringing 2017 total to $1.2 billion, which the company said is ahead of its original plans. “This is a light-speed version of transformation,” said Nicholas Heymann, an analyst with William Blair & Co. “This is a really compressed process.” Industrial operating cash flow, a major focus for investors, was $1.7 billion in the quarter, excluding deal taxes and pension plan funding, GE said. The company reduced its industrial-cash-flow forecast to $7 billion after previously saying it could top $12 billion.