GE Slashes 12,000 Jobs In Troubled Global Power Business

A day after labor unions warned that General Electric was planning thousands of job cuts in its troubled power-generation unit, GE confirmed that it’s planning to cut 12,000 jobs globally in its power business as the company’s new leadership tries to revive the company’s moribund stock price.

The reductions would account for about 18% of GE Power’s workforce, will mostly affect professional and production workers outside the US. GE is also paring back capital expenditures and research-and-development spending as it grapples with a sharp downturn in gas- and coal-power markets.

The cuts add to a flurry of reductions by recently installed Chief Executive Officer John Flannery, who has already scaled back use of corporate jets and delayed work on a new Boston headquarters since taking over from longtime CEO Jeff Immelt back in August. GE, the world’s largest maker of gas turbines, said last month it would pare the quarterly dividend and sell some businesses.

Trimming the workforce will help GE achieve its goal of slicing $1 billion of structural costs next year in the power division. That plan is part of a larger effort to cut $3.5 billion of expenses across the company through 2018.

GE shares were up 0.5% in premarket trade. However, the company’s shares have sunk 44% this year.

According to Bloomberg, GE had about 300,000 employees across its operating units at the end of last year. Power was the company’s biggest division, with sales last year of $26.8 billion. The total would have been $36.8 billion after accounting for the effects of a reorganization this year in which GE added some energy businesses to the unit.

The manufacturer has been hit hard by flagging demand for electricity generated with natural gas, in part due to a shift toward power from renewable sources. In addition, “we have exacerbated the market situation with some really poor execution,” Flannery told investors last month.

The power unit expanded considerably with the $10 billion acquisition of Alstom SA’s energy business in 2015 - but the drawn-out deal has turned into a drag. Intended to broaden the product lineup with steam-turbine technology, the tie-up pushed GE Power’s workforce to 65,000 at a time when the market was slowing.

“Alstom has clearly performed below our expectations,” Flannery said last month, referring to the assets acquired from the French company.

As the size of the hurdles became clear this year, GE made changes to management in the power business and reorganized divisions. Russell Stokes was named head of GE Power in June, taking over from Steve Bolze, who left the company shortly after Flannery was named to succeed Jeffrey Immelt as GE’s next CEO.

Online message boards for GE employees were active in recent weeks as workers discussed layoff notices going out in GE Power manufacturing locations such as Greenville, South Carolina, and Schenectady, New York. GE also met with union representatives in Europe this week to discuss cutbacks there.

Today, Reuters reported that GE is planning to slash 1,600 jobs from its power-generation business in Germany. The cuts will affect staff in Mannheim, Stuttgart, Berlin, Moenchengladbach and Kassel and will be confirmed after talks with labor representatives, GE said in a statement. Yesterday, Reuters reported that the company could cut as many as 4,500 jobs across Europe.

After the financial crisis he divested many of GE's 'toxic' financial divisions at the bottom and instead invested heavily in the oil sector instead, which looked like a smart move, until the business topped.

Back in November, Flannery slashed the dividend by 50%, hoping to rescue some cash flow.

Even as the stock has underperformed, because of the rapidly decreasing earnings and declining sales, GE isn't cheap on a historical basis, based on p/b, p/s, p/e ratios. As a matter of fact, at 28x earnings and 1.7x sales, the stock is still at the top end of its valuation.

Comments

Branded ZeroPoint Thu, 12/07/2017 - 15:15 Permalink

Naw, government needs the tech alright, but the tech and manufacturing can all be liquidated for pennies on the dollar to other defense contractors.Need the brains that produced that stuff? Just hire them, I hear their looking for work.. . . problem solved.Iran, on the other hand, may need to re-source their nuclear trigger supplier.

In reply to by ZeroPoint

nmewn Thu, 12/07/2017 - 07:06 Permalink

But they have a nice empty plant in the lighting division sitting empty in Wisconsin they'd like to get rid of if anyones interested!Do the Chi-Coms get unemployment insurance? ;-)

SoDamnMad nmewn Thu, 12/07/2017 - 07:20 Permalink

When the economy is great (not for the last couple decades but before that), the appliance division was making big bucks and they got promoted.When there was a war going on, the jet engine division was making big bucks and they got promoted.That was the way Jack Welch picked his leaders.When a division was in the wrong situation, the job cuts sent you out because you weren't "on track" to hit the GE goals.Same as it ever was.  Hit the road all you skilled, hard working people.Yes, I once worked for GE but couldn't stand the white shirt mentality so I left.

In reply to by nmewn

RedBaron616 SoDamnMad Thu, 12/07/2017 - 09:12 Permalink

This pure nonsense. First of all, GE aircraft engines have always done well. They are well ahead of Pratt & Whitney. P&W got the F-35 alone to throw them a bone. GE sells a lot of commercial aircraft engines as well.War might sell a bit more parts, but it won't sell any brand-new jet engines. I used to work at a government facility that overhauled the military aircraft engines.When you don't know what you are talking about, shut up before you remove all doubt that you are clueless about GE's aircraft engine business and how it is affected by war.

In reply to by SoDamnMad

cherry picker Thu, 12/07/2017 - 07:12 Permalink

Just before every melt down or recession/depression, these articles appear, corporations slashing jobs.I predict this downturn will be happening within 6 months.

Berspankme Thu, 12/07/2017 - 07:19 Permalink

I worked in Power for a few years. Bloated pig and Alstom was a poorly conceived idea. Immelt really led this company down the marxist path. We spent more time lecturing each other on bullshit “diversity” “sustainable” “globalist” etc. Immelt was an Obama ball licker. IMO, GE has cancer

Shibumi2 Thu, 12/07/2017 - 07:19 Permalink

You won't find a millennial anywhere that recognizes the GE meatball logo...

huh?

They should just network their corporate computers and mine BITCOIN

Problem solved

dr kill Thu, 12/07/2017 - 07:26 Permalink

General Mills, General Electric, General Petraeus, General Motors, General Silveria, General Hospital,....... I'm noticing a pattern.

gatorengineer ludwigvmises Thu, 12/07/2017 - 07:43 Permalink

The bigger story here, is the complete and utter collapse for electricity demand.  I work / worked in the power sector and the whole US power sector is down tens of thousands of jobs.  The only activity left in power is transmission and distribution upgrades brought to you by the bought and paid for Public Service Comissions across the US. (an electric utility is allowed a guaranteed return on its investment of 5-10 percent depending upon the state, so the more they spend the more they make).  Other than T&D power is dead.

In reply to by ludwigvmises

gatorengineer overmedicatedu… Thu, 12/07/2017 - 08:10 Permalink

When they can get a family sized sedan to have a 400 mile range in 20F weather, and a 15 minute or less recharge, and be say a 10 percent premium or less to IC, then it will be interesting.  Until then not so much.  Electric cars would be a dead non-issue if big oil didnt have diesels outlawed in the US.  A european diesel accord at 50MPG would sell a ton here in the US, but unfortunately not good for big oil.

In reply to by overmedicatedu…

RedBaron616 gatorengineer Thu, 12/07/2017 - 09:46 Permalink

That's a dumb comment. Oil companies would make money from diesel. It comes from oil. Your logic is non-logic.You keep your diesel. Too many parts are very expensive. Just an oil change costs a lot more than a gasoline engine and the air filters are the same way. Don't some of them also have two batteries? I sold my 2000 Honda Accord SE with 283K miles on it and it still ran well.

In reply to by gatorengineer

I Feel a littl… RedBaron616 Thu, 12/07/2017 - 16:02 Permalink

??????????? Oil change in a diesel engine costs the same as a petrol engine, air filters also same, no they don't have two batteries. They also don't have spark plugs to change, or a high voltage pack to break down, they don't have corrosive exhaust gasses so the muffler as you call it never needs changing, they give more mpg, they are more robust and reliable in general and a modern tubo charged diesel performs as well as a petrol engine, e.g. my familly saloon has 2.0 litre diesel 150 hp and 49mpg (it's 10 years old).

In reply to by RedBaron616

GunnerySgtHartman gatorengineer Thu, 12/07/2017 - 09:44 Permalink

Other than T&D power is dead.Totally agree, sir.  I have been watching First Energy try to strong-arm the state of Ohio into subsidizing its money-losing Davis-Besse and Perry nuclear power plants through a surcharge on ratepayers (this, in a state with a competitive electric market) by threatening to lay off people.  As I'm sure you know, nuke plants are hugely expensive and tend to be money-losers anyway.  FE has been shutting down large and small generation units left and right to keep its head above water.  They are also trying to bully the West Virginia Public Service Commission into forcing one of their subsidiaries to buy a coal-burning plant from FE's competitive generation unit, which will then be subsidized by the ratepayers in that state.  The WV PSC allowed this once already.FE is a garbage company; they can't compete, and they resort to bully tactics to keep their business afloat.  Nobody I know of will be crying if they file bankruptcy in the next couple of years.

In reply to by gatorengineer

Lostinfortwalton Thu, 12/07/2017 - 07:36 Permalink

The power turbines in the division that the new GE head wants to sell are just modified aircraft turbine engines in the division he wants to keep. The ground power engines run on natural gas and are coupled to generators. Seems like a very thoughtless move.