Replication refers to DNA replication and division refers to the cell division. Yes it is true that, in E.coli replication can be slower than the division time. This is a well known problem in molecular genetics.
The bacterium copes up with this by having a partially replicated genome during the beginning of the "cell cycle". So there are actually two origins of replication when a new cycle starts. When the replication proceeds you have multiple forks (from the replicated origins). Because of these multiple forks (forks within forks), the replication time speeds up. See the figure below:
From Fossum et al. 2007
For more details see:
Fossum, Solveig, Elliott Crooke, and Kirsten Skarstad. "Organization of sister origins and replisomes during multifork DNA replication in Escherichia coli." The EMBO journal 26.21 (2007): 4514-4522.
The picture that you have shown is something totally different. As mentioned by Chris, the picture illustrates the Messelson-Stahl experiment to demonstrate the semiconservative nature of DNA replication. Do not confuse that with the above problem. As for the 40min shown from generation-1 to generation-2, in this picture, I feel that it is a misprint.