GE planning to lay off thousands

AFP, NEW YORK

Wed, Nov 15, 2017 - Page 10

Embattled industrial giant General Electric Co (GE) on Monday announced a massive restructuring plan that includes thousands of job cuts and sales of some units as the new management tries to right the corporate ship.

Newly installed GE chief executive John Flannery rolled out the plan to investors in New York, describing a moment of reckoning for the company amid falling revenue, a steep drop in the share price, and accusations of corporate waste and mismanagement.

With its market capitalization down by more than US$100 billion since January, the 125-year-old maker of jet engines and power turbines plans to shed about US$20 billion in assets, selling off parts of its transportation and electricity businesses, as part of the turnaround to narrow the conglomerate’s focus to aviation, healthcare and energy.

It also slashed its quarterly dividends in half to US$0.12, plans to reduce the number of seats on the board to 12 from 18 in April and tie executive pay to results.

“We have not performed well for our owners,” Flannery said. “That is unacceptable and the management team is completely devoted to doing what it takes to correct that.”

GE chief financial officer Jamie Miller said the company would cut the corporate workforce by 25 percent. The company has about 24,000 employees, which means at least 6,000 job losses in that division alone.

Beyond that, the company has not yet provided details of the layoffs, or the other nations or units that would be impacted, referring broadly to “workforce reductions” through cost cuts, cessation and consolidation.

However, GE Power, which includes Alstom, is to undergo a major overhaul to cope with changes in the energy market.

Flannery said the Alstom energy business, which GE bought in 2015 for US$13.5 billion in the company’s largest-ever acquisition, was “disappointing.”

“Alstom has fallen below expectations,” he said.

He praised the unit’s employees, but lamented its poor performance in renewable energy and the time needed to close the deal.

“We didn’t have a clear view of the market,” he added in thinly veiled criticism of his predecessor Jeff Immelt, whom Flannery replaced in August.

GE is also to shed its majority stake in the oilfield services company Baker Hughes.

Flannery said the turnaround plan would deliver a “simpler, more focused GE.”

“Complexity has hurt us,” he said.

The shift favors the conglomerate’s strongest divisions — aviation, energy and health (medical equipment and services).

Those units employed 156,000 people at the end of last year and represented 57.7 percent of overall revenue that year, which amounted to US$123.7 billion.

GE was due to pay out US$8 billion in dividends, but by September it had cash flow of only US$7 billion.

Flannery said such hefty payouts no longer made sense.

Flannery said he recognized the dividend cut would hurt those shareholders most who relied on dividends for income, acknowledging “the gravity of this decision and the effect it has on many people.”

“We understand this is an extremely painful action for our shareholders,” Flannery said, adding that the decision was made “after extreme deliberation and consideration of what the alternatives were.”