New York: General Electric Co’s boss wants investors to know that all the negative headlines dogging the manufacturer don’t tell the whole story.
The company is already changing for the better after “a very tough year,” chief executive officer John Flannery said in a letter to shareholders Monday. GE is rethinking its structure, cutting costs and enhancing management accountability. It’s also following through on a pledge to overhaul its board, with the nomination of an accounting expert and two former industrial CEOs.
Flannery is using the shareholder letter to lay out a path forward and push back against Wall Street analysts and the media for dwelling on the company’s string of recent failures. He’s fighting an uphill battle. GE is once again posting the year’s biggest decline on the Dow Jones Industrial Average after taking a $6.2 billion (Dh22.77 billion) charge related to an old insurance portfolio and disclosing a US Securities and Exchange Commission investigation into its finances.
“How the company is being portrayed in certain quarters is overwrought and, in most cases, does not reflect the reality of GE that our customers and employees are seeing around the world,” Flannery said in the letter. “There are things we need to fix. But we can. We know how to. And we will.”
GE fell 1 per cent to $14.35 at 9.31am in New York. The shares tumbled 17 per cent this year through February 23, the biggest drop on the Dow Jones. The company was also the biggest laggard on the stock gauge last year, falling 45 per cent.
CEO’s confidence
The letter marks Flannery’s latest attempt to change the narrative around GE, which is grappling with one of the deepest slumps in its 126-year history. The new CEO, who took over Jeffrey Immelt’s longtime post last year, has acknowledged that internal mistakes have exacerbated the challenge of flagging demand for its products, such as gas turbines and locomotives.
Still, Flannery said he has faith in GE’s future, with areas such as software and 3-D printing offering hope. By narrowing the focus of GE’s digital business and targeting existing customers, the company should be able to double sales of its Predix operating system to $1 billion in 2018, Flannery said.
In a separate statement, GE announced the nomination of former Danaher Corp CEO Larry Culp and Thomas Horton, who served as CEO of American Airlines, to the board in advance of the annual shareholder meeting scheduled for April 25.
Leslie Seidman, who was chairman of the Financial Accounting Standards Board, is also being put up for a board seat, GE said. That comes as GE faces an SEC investigation into its accounting for the insurance portfolio and service contracts in the industrial operations.
Narrower focus
The company also announced the departure of eight current directors. Among those remaining are lead director Jack Brennan and Ed Garden, a representative of activist shareholder Trian Fund Management, who was appointed late last year. Brennan will help facilitate the transition and won’t stand for re-election in 2019, GE said.
