Next leader of GE caps 30-year trip to the top
He is the quintessential company man.
John Flannery, who was tapped Monday to become the chief executive of General Electric later this summer, has spent his 30-year career with the industrial giant. He has headed up offices from South America to Asia. He has turned around a flailing business, the company’s $18 billion health care division. He even has a home on Nantucket, where a cluster of high-ranking GE executives vacation.
He will need to draw on this accumulated experience and goodwill in the years ahead. In taking over from Jeffrey Immelt, GE’s well-liked chief executive of 16 years, Flannery faces the difficult task of managing one of corporate America’s last conglomerates. Although GE slimmed down under Immelt, shedding its finance division and NBCUniversal, it remains an extraordinarily complex company, making everything from microwaves to wind turbines.
Flannery, 55, will also be counted on to revive the company’s languishing stock price. Under Immelt’s leadership, shares of GE fared poorly, drawing the ire of investors and the involvement of an activist hedge fund that hastened the succession planning that led to Flannery’s appointment.
Already, Wall Street is betting that Flannery has what it takes. GE shares were up more than 3 percent Monday. And analysts spoke approvingly of his behind-the-scenes maneuvering in various GE deals — particularly the $13.5 billion agreement two years ago to take over the power business of the French giant Alstom and the spinoff that year of GE’s consumer finance arm, Synchrony Financial.
Major divestitures?
That Flannery is not afraid to divest assets has some analysts betting that he could reach back into that toolbox to further simplify GE’s sprawling business.
Any major divestitures will probably take time. Flannery said in a video broadcast on Facebook that he planned to conduct a review of the company with a “sense of urgency” and that he would make recommendations later in the year.
Flannery said he was going to “review all aspects of the business,” with a particular focus on the cost structure. For the next few months, he will be traveling the globe, visiting businesses, customers and investors. Asked whether those decisions would be about the portfolio or the financial outlook, he said, “I think you should expect both.”
Flannery lands in the hot seat at a pivotal moment for GE, a 125-year-old company with $120 billion in annual sales.
Major shifts in geopolitical tides have resulted in bumpy currency fluctuations for the multinational conglomerate. And while Immelt, who is retiring as GE’s chief on Aug. 1, praised President Donald Trump’s policies on deregulation and tax reform, he criticized his nationalistic trade policies, publicly supporting Mexico and NAFTA, which Trump wants to renegotiate.
In an interview, Flannery said he has had “no interaction with President Trump,” adding that the administration’s proposals to cut taxes and spend on infrastructure represented an “agenda” that GE supported.
Avoiding politics
But Flannery suggested that he would try to steer clear of politics as he conducted his review of the company.
In fall 1987, Flannery, fresh from graduating from the Wharton School at the University of Pennsylvania, arrived at General Electric’s finance arm, GE Capital. Just a few weeks later came Black Monday and the stock market crash.
The son of a former director for bank supervision for the Federal Deposit Insurance Corp., Flannery worked with a group that assessed risks in providing financing for the booming arena of leveraged buyout deals. In the wake of the market crash, as banks steered clear of the risky deals, GE Capital moved in.
After tours in Latin America, Asia and India, Flannery returned to corporate headquarters to run mergers and acquisitions in 2013.
There, under the direction of Immelt to transform the company and shed various businesses, Flannery negotiated the Alstom deal in France and also spun off Synchrony and sold off GE’s refrigerator business.
In 2014, Flannery stepped in to run the company’s health care business, which is a leader in imaging and diagnostic equipment. Many analysts and investors expected the unit to be sold or spun off, but Flannery instead expanded it, pushing into life sciences and cell therapy systems businesses.
Still, Flannery may face new pressure to evaluate businesses to divest.