General Electric moved again to reset its troubled power division on November 19, 2018, appointing new leadership for its gas-power business and recalling retired veteran John Rice to help guide the turnaround.
The changes were the latest sign of pressure on GE Chief Executive Officer Larry Culp, who was trying to cut debt and restore profits at the 126-year-old Boston-based conglomerate. Culp had already split GE Power three weeks earlier, separating the gas-turbine operation from the units tied to coal- and nuclear-fueled plants, power grids and related equipment.
“One of my top priorities is positioning our businesses to win, starting with GE Power,” Culp said in a statement.
GE said Rice, who spent 39 years at the company, would serve as chairman of gas power and report to Culp. Rice previously led GE’s energy unit and retired last year. The company said his experience with GE’s gas customers and management background would provide mentorship to the new leadership team and help position the business for success.
Scott Strazik, who had been running GE Power’s repair and maintenance business, was named chief executive of Gas Power. In that role, he will oversee both equipment sales and services. Russell Stokes, the current chief executive of GE Power, will take over as chief executive of the company’s other power activities. Both Strazik and Stokes will report to Culp.
GE stock fell 1.1 percent to $7.94 in afternoon trading, and the shares had dropped 56 percent in 2018. The market reaction reflected the scale of the problems facing the business.
Analysts said Rice’s return could help, but they warned that the division’s problems would not be fixed quickly. Scott Davis of Melius Research said GE was “desperate for leadership” and called the move smart. Nick Heymann of William Blair described Rice as “a smart, prudent guy who is known for not taking any unwanted risk.” Jeff Sprague of Vertical Research Partners said Rice knew the business but added, “there is no quick fix.” He also said Stokes had been given “a mess that’s probably too big for one guy to fix,” and added, “I don’t think this really changes anything.”
GE Power’s earnings have been hit hard as demand for gas turbines has weakened, leaving GE, Siemens and Mitsubishi Hitachi Power Systems with excess capacity and fewer sales. In the third quarter, GE Power lost $631 million and wrote off $22 billion, underscoring the bleak outlook for the unit.
