“This is the opportunity really of a lifetime to reinvent an iconic company,” Flannery added.
There will be a renewed focus on health care, aviation and energy, according to a presentation released for investors prior to the meeting. That’s in contrast to the current wide-ranging set of interests that also includes media, railroads, chemicals, marine engines and banking.
For Flannery, it also represents a divergence in management style away from the high-flying aggressiveness of Jeff Immelt and Jack Welch.
“I was forced to confront a lot of the sort of deeper questions about the company,” Flannery said. “What’s the essence of the company I love so much?”
The company now sees adjusted earnings for the year ahead of $1 to $1.07 a share and free cash flow still at significantly reduced levels of $6 billion to $7 billion, which it pledged to improve. As expected, GE said it is looking to exit more than $20 billion of assets as it tries to sharpen its focus on “what makes a ‘GE’ business.”
In addition, the company said it will “address overcapacity” and simplify its portfolio. While it slashed its dividend in half, the company also set a $3 billion share buyback priority. Addressing its pension plan shortfalls, Flannery said the company will borrow $6 billion to take advantage of the current rate environment.
The board of directors will be reduced from 18 to 12, with three new members slated “with relevant industry experience.” Directors will have 15-year term limits.
“We have not performed well for our owners,” Flannery said. “This is unacceptable, and the management team is completely devoted to doing what it takes to correct that.”
Employee bonuses also will be restructured, with elimination of the three-year cash long-term performance awards and a switch to a program that conforms to “market norms.”
The dividend allocation will be $4.2 billion for 2018, pushing it from above 100 percent of free cash flow to 60 percent to 70 percent, and the dividend yield from 4.7 percent to 2.3 percent. The yield had been the highest in 30 years not counting the financial crisis.