U.S. Markets close in 1 hr 31 mins

GE's New CFO Lacks 'Wow' Factor and That's Fine

Brooke Sutherland

(Bloomberg Opinion) -- General Electric Co.’s choice for its next chief financial officer lacks a “wow” factor but checks the right boxes.  

The industrial giant announced on Monday that it had hired Carolina Dybeck Happe – currently the CFO at Copenhagen-based shipping company A.P. Moller-Maersk A/S – to help CEO Larry Culp carry out a turnaround that’s finally starting to yield some results. Jamie Miller announced her intention to step down as GE’s CFO in July, and the company’s been looking for a replacement ever since. Miller will officially hand over the reins to Dybeck Happe in early 2020.

Dybeck Happe previously spent more than 15 years at Stockholm-based lock maker Assa Abloy AB, but she has little name recognition in the U.S. Certainly, this isn’t the kind of blockbuster hire that some investors had been hoping to see. Many had their eye on Daniel Comas, Culp’s previous right-hand man at Danaher Corp.  A hire like that would have gotten more reaction out of the stock. Instead, shares of GE traded up about 1% Monday amid a broader rally. Still, amid ongoing investigations by the Department of Justice and the Securities and Exchange Commission into GE’s accounting practices, the value of simply announcing a hire and putting this matter to bed shouldn’t be discounted. And frankly, there is enough of a cult of personality already baked in to the current price. Most investors would tell you the stock could easily be 50% lower if it weren’t for Culp and the reputation for operational excellency he earned in his Danaher years.

Culp has managed to so far avoid fresh nasty surprises in the long-term care insurance business and elsewhere at GE Capital, while the troubled power business no longer appears to be in free fall. There’s still a long way to go in this turnaround story, though. Remaining headaches for GE include a competitive market for what little demand remains for gas turbines in a world increasingly turning to renewable energy; the impact from divestitures; a fierce debate about the sustainability of its aviation unit’s free cash flow; and a continuing need to restructure, particularly in Europe where cost-cutting discussions can be notoriously difficult. Culp needs someone to help him execute on further operational changes, of course. He also could use the perspective of another outsider to continue to root out the cultural problems that led the company into this mess. Miller did a stint at insurance company WellPoint Inc., but she’s been with GE since 2008 and was likely too much of an insider to execute the kind of overhaul the company really needs. This includes finally breaking with its tendency to over-engineer its financial statements and prioritize optics over reality.

There’s no reason why Dybeck Happe can’t be that person. Shares in Assa Abloy returned more than 150% to investors over the course of Dybeck Happe’s tenure as CFO there amid a spike in earnings, fueled in part by prudent cost control and in part by a steady stream of M&A. She’s only been at Moller-Maersk since January, but also sits on the board of Schneider Electric SE. Dybeck Happe’s European background could prove particularly helpful to GE on the cost-cutting dilemmas tied to its ill-fated acquisition of Alstom SA’s energy arm. And it’s nice to see a female executive replaced by another female executive for a change. Dybeck Happe was the first female CFO in Moller-Maersk’s 115-year history and was appointed there after at least one investor asked for more diversity, so her departure will be felt at the male-heavy company. Moller-Maersk’s loss may just be GE’s gain.

To contact the author of this story: Brooke Sutherland at bsutherland7@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.