Contemporary Strategy Analysis, 10th Edition

Case 20Restructuring General Electric*

The appointment of Larry Culp as the chairman and CEO of the General Electric Company (GE) on October 1st, 2018 was a clear indication of the seriousness of the problems that had engulfed the company. Culp, the former CEO of the highly‐successful conglomerate, Danaher Corporation, had been appointed a GE director only six months previously and was the first outsider to lead GE—every one of GE’s previous CEOs had been a career manager at the company. On the same day as Culp’s appointment, GE abandoned its earning guidance for the year and announced a $23 billion accounting charge arising from a write‐down of goodwill at its troubled electrical power division.¹

Culp’s predecessor, John Flannery had been CEO for a mere 14 months—a sharp contrast to GE’s two previous CEOs: Jeff Immelt (16 years) and Jack Welch (20 years). Flannery’s tenure at GE has coincided with of the company’s most difficult periods in its entire 126‐year history. In November 2017, amidst deteriorating financial performance, Flannery announced a halving of GE's quarterly dividend, the proposed sale of its lighting and locomotive units—two of GE's oldest businesses—and the elimination of 12,000 jobs in the power division.

In 2018, the situation worsened. In January, GE announced that it would be paying $15 bn. to cover liabilities at insurance companies it had sold 12 years previously. In February, GE confirmed suspicions over its dubious accounting practices by restating ...