Jeffrey Immelt is stepping down as chairman and chief executive of General Electric, bringing to an end a tumultuous 16-year tenure during which he dramatically reshaped the manufacturing powerhouse but failed to win over Wall Street.
Amid mounting pressure from activist investor Trian Fund Management, GE said Monday that Immelt, 61, will be replaced by John Flannery, a 30-year company veteran who oversaw a jump in profits at the healthcare unit. In a sign of just how much opposition had built against Immelt in the investing community, the stock soared the most in more than a year and a half after the announcement was made.
There were great expectations when Immelt replaced the legendary Jack Welch as CEO back in 2001. The new boss was seen as a big thinker who could guide GE into the digital age and do so with a lighter touch than his cutthroat predecessor.
Immelt hasn’t shied away from major acquisitions to sharpen the focus on making jet engines, medical scanners and gas turbines, including the $10 billion purchase of Alstom SA’s energy business. On Monday, GE reached a deal with U.S. regulators to win approval of its purchase of oilfield service giant Baker Hughes. And Immelt withdrew GE almost entirely from financial services, which once accounted for about half of sales.
In Fort Worth, the company builds locomotives and mining equipment at a complex just west of the Texas Motor Speedway and last month opened a “mission control” center in AllianceTexas to digitally track its trains.
Yet investors were unimpressed. As the stock languished — shares are lagging behind the broader market this year after underperforming in 2016 — Nelson Peltz’s Trian began stepping up pressure on Immelt. In March, GE agreed to deepen cost cuts after discussions with the activist investor.
“GE may not necessarily need a drastically new message, but it needs a new messenger,” said Barclays analyst Scott Davis.
Flannery, 55, has an “excellent” reputation inside GE despite not being known well by shareholders, Davis said. Flannery may be more willing to pursue a much-needed breakup of the company, Davis said.
The incoming CEO said he would scrutinize GE’s portfolio “with speed and with urgency and with no constraint.” He will take over Aug. 1 and assume chairman duties following Immelt’s retirement Dec. 31.
“I’ll look at each business, I’d say, with a focus on its performance, its growth outlook, the cash, the cost structures, the returns, the competitive environment,” he said on a conference call. GE shares gained $1, or 3.6 percent, to close at $28.94 on Monday.
Flannery, who was named the head of GE Healthcare in 2014 after handling M&A for the whole company, has boosted sales and profit margins in the division. He joined GE in 1987.
This article includes material from Star-Telegram archives.