General Electric Co plans to cut 7,000 jobs at GE Capital, the source of about 40 percent of the company's profit, and reduce expenses at the business by about US$1 billion this year.
GE Capital, based in Stamford, Connecticut, had 91,000 employees at the end of last year. Revenue at the unit fell 6 percent in the first quarter.
General Electric shares have declined 14 percent since Thursday, when the company said net income fell for the first time in more than seven years and first-quarter sales were little changed. The drop fed investor concern that profit growth is slowing at the world's largest company by market value.
The slowdown at the capital unit "shocked a lot of people, and now they're responding to it by taking headcount out," said Rich Turgeon, an analyst with Victory Capital Management, which owns shares in General Electric. "My question is, why is growth slowing? It's a little disappointing."
Jim Parke, chief financial officer of the financing unit, disclosed the job cuts on a conference call with investors.
They're in addition to 3,000 job cuts the financing unit said it planned in December as it consolidated administration at some of its 24 businesses, such as European equipment financing.
The latest job losses stem in large part from its growing use of the Internet and other digital tools to cut costs, as well as the elimination of duplication at companies it's acquired, said spokesman David Frail.
The company plans no one-time expenses for the "regular, ongoing productivity initiatives," he said, adding that the unit has cut 19,000 jobs since the second half of 2000. Total employment at the unit may not decline because the company may grow in other areas or add new workers through acquisitions, Frail said.
Profit at the maker of aircraft engines and light bulbs, and parent of NBC and the GE Capital financing unit, rose for 20 consecutive years under former chief executive Jack Welch, who retired in September. Shares averaged an annual return of 24 percent during his tenure, though have fallen 20 percent since Jeffrey Immelt took over as chief executive.
"People just don't know if they're going to be able to keep earnings" at that level, said Carl Domino, who manages US$1.7 billion at Northern Trust Value Investors.
Shares of General Electric fell US$1.70, or 5.1 percent, to US$31.85 yesterday. The company had 310,000 employees last year.
The New York Times on Monday quoted Robert Olstein, an accounting expert and manager of the Olstein Financial Alert Fund, as saying GE "is going to stumble before the year is out" because its profit is based on financial engineering.
Critics such as Olsten maintain that General Electric manipulates the timing of gains and losses at GE Capital to keep earnings steady. GE Capital's earnings rose 8 percent in the quarter, although analysts later attributed the growth to a lower tax rate.
General Electric characterized the New York Times article as "biased and one-sided," according to a letter to shareholders posted on the company's Internet site that detailed what it called errors in the story.
GE Capital expects to sell US$50 billion to US$70 billion of debt in 2002, and to have about US$475 billion of assets by the end of the year, Parke said on the call. Some US$10 billion to US$20 billion of new debt will be used to pare commercial paper, short-term financing companies use to finance day-to-day operations.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique