General Electric is on a free-fall, and you don’t want to be underneath when it hits the floor
The golden days of the massive conglomerate are apparently a thing of the past, as the recent plan laid out by its new CEO hasn’t been received with the welcoming hands that he perhaps expected
when he started talking.
General Electric has experienced a recurring losing streak this year, with shares dropping 40% year to date, hitting their lowest levels since December 2011.
The reason? The company has been struggling with poorly-performing business units for more than a decade, along with certain investment decisions that have jeopardized the financial stability
of the business.
The previous leader, Jeff Immelt, took over the company in 2001 after Jack Welch, GE’s legendary CEO, retired and left the company in his hands. Since then, GE stocks have fallen 29%, and
many once-renowned subsidiaries such as NBC Universal and GE Capital have been sold off to stop the free-fall. Something that has given investors enough reasons to criticize his leadership.
Now, after his not-that-unexpected resignation, the new CEO John Flannery has a lot of pieces to pick up.
His challenge is undoubtedly a difficult one, and Flannery himself has called the process “a heavy lift to turn around”. And in fact, analysts have already said a few ugly things about the new CEO’s
plans to turnaround the giant, since as Steve Tusa from JPMorgan puts it, the company has “limited quick-fix catalysts to change the narrative”, adding that “what went wrong cannot be easily
As part of his plan to make things better, he decided to slice the company’s dividend by 50%, something that has been done only three times in GE’s 125-years of history, and he has also
announced that he will be cutting jobs, seats on the company’s board, and $3 billion in expenses. A loud start for Mr. Flannery indeed.
These decisions have sent the company’s shares on a nose-dive, losing almost 8% in value on Monday, after the announcements were made, leaving a trail of deeply-concerned investors who still
doubt this is the right path towards a recovery.
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