Power failure at GE

Flannery: unexpected dismissal from GE

"Every time GE seems to turn the corner, there is a bus to smash into," says Lex in the Financial Times. So the industrial conglomerate's new CEO, Larry Culp, should know that his is a "precarious appointment". It follows the unexpected dismissal of John Flannery, just 14 months into his role. He was booted out shortly after the US conglomerate warned that its struggling power business would cause it to miss its profit forecast. Flannery's time at the helm of GE was the shortest of any leader in its 126-year history.

It was not a distinguished tenure, says Alistair Osborne in The Times. Flannery halved both the dividend and the share price before getting GE kicked out of the Dow Jones industrial average, where it had been for more than a century. "How much of that is entirely Mr Flannery's fault is a moot point, given his inheritance from Jeff Immelt, his predecessor of 16 years." But the board felt Flannery did not move quickly enough to address the company's various problems and the "last straw" was reportedly a looming write-down of $23bn at GE's ailing power business, say Thomas Gryta and David Benoit in The Wall Street Journal.

This is just the latest episode in a series of missteps since the turn of the century. GE was worth nearly $600bn in August 2000, making it one of the most valuable companies in history. The group emerged from Thomas Edison's light-bulb business, founded in 1878, and became a behemoth encompassing jet engines, power turbines, medical hardware and financial services. The latter almost sank it during the crisis of 2008, while efforts since then to streamline the sprawling group have met with little success.

Recently, GE has had problems with blades for its gas turbines used for generating electricity, says Ed Crooks in the Financial Times, "but the problems at its power division appear to reflect more fundamental issues". The group specialises in equipment for gas-fired power, but that has been squeezed by low-cost renewable energy and weak electricity demand in developed countries.

Culp says he will "move with urgency" and the shares jumped by almost 16% when the change of leadership was announced. Still, it "wouldn't be the first time that investors have got overexcited about a new start", says Tom Buerkle on Breakingviews.

A failure of corporate governance

It bodes well that GE has finally "had the guts to hire a strong outsider" with a good track record, says the Evening Standard's John Armitage. Culp increased the share price of Danaher, another conglomerate, fivefold between 2001 and 2014.

The key story here is the damage wrought over the years by a supine board that failed to challenge Immelt. He scooped up assets in France that made GE's power division more reliant on fossil fuels, just as renewables were gathering momentum. Once the board finally woke up, it appointed an internal manager, Flannery, to look into it. The upshot? "Next time Mike Ashley bleats about investors demanding stronger boards, remember GE."

Britain's ten most-hated shares

These are the ten most unpopular firms in the UK, based on the percentage of stock being shorted (the "short interest").

Short-sellers aim to profit from falling prices, so it helps to see what they're betting against. The list can also highlight stocks that may bounce on unexpected good news when short-sellers are forced out of their positions (a "short squeeze"). New entries include Pearson and distressed-debt purchaser Arrow Global. The latter's rising leverage and operating costs have rattled investors, while lower demand for printed textbooks poses a problem for educational publisher Pearson.