GE SHARES SINK TO 2-YEAR LOW
Company taps investor to board spot
Shares of General Electric Co. sank to a two-year low yesterday after the struggling industrial giant named an activist investor to its board amid a management shakeup as new CEO John Flannery tries to change course.
GE elected Trian Fund Management co-founder Ed Garden to its board to replace former Deere
& Co. CEO Robert Lane, who is retiring for health reasons. Trian has been pushing GE to overhaul its business.
“We have maintained an active and constructive dialogue with Trian since they became a shareowner in 2015, as we do with all large investors,” Jack Brennan,
GE’s lead independent director, said in a statement.
Garden works closely with cofounder Nelson Peltz at Trian, which has owned an approximately 1 percent share in GE since 2015.
After discussions with Trian, GE established a $2 billion cost-reduction goal in March and linked bonuses of its senior management to hitting profit-related goals.
“Like other GE shareholders, I am disappointed by the recent performance of GE’s stock,” Garden said in a statement. “But I continue to believe that GE represents an attractive long-term investment opportunity with significant upside.”
The addition of Garden to the board is positive, because GE needs to make a “seismic shift” in the wake of the departure of former CEO Jeffrey Immelt, according to Ivan Feinseth, director of research at Tigress Financial Partners.
“You have one of the world’s leading companies making a new multi-year low in what is a raging bull market,” Feinseth said. “GE went heavily into oil services at the peak of the oil market. They got out of the media business just as the value of media content was taking off. Immelt made a number of bad choices. In theory, any fixes are going to be dramatic and are going to take a long time.”
Immelt stepped down as chairman of the Boston-based company Oct. 2.
Flannery is weighing changes to a portfolio that includes jet engines, locomotives and gas turbines. With shares dropping an eighth straight month — the longest streak in decades — he’s under pressure to deliver results fast. GE’s earnings outlook is at risk as it contends with weak cash flow and sluggish demand in the powergeneration and oil markets.
GE was the worst Dow Jones industrial performer yesterday, finishing at its lowest level since August 2015. Its stock closed at $23.43, down 96 cents (3.9 percent) after reaching a 52-week low of $23.25.
Garden’s appointment comes three days after GE announced the departures of three senior executives Friday. Vice chair John Rice, who leads GE’s Global Growth Organization, will retire Dec. 31, as will Beth Comstock, who leads GE Business Innovations.
Jamie Miller, CEO of GE Transportation, will replace chief financial officer Jeffrey Bornstein.