General Electric Co. is planning to cut 12,000 jobs in its power business, a person familiar with the matter said, as the company’s new leaders move to slash costs and stabilize the beleaguered manufacturer.
The reductions, accounting for about 18% of GE Power’s workforce, will mostly affect professional and production workers outside the U.S., said the person, who asked not to be identified discussing the plans before they are revealed. GE is also chopping capital expenditures and research-and-development spending as it grapples with a sharp downturn in gas- and coal-power markets, the person said.
The moves, which could be announced as early as Thursday, add to a flurry of cost cuts by Chief Executive Officer John Flannery, who has already scaled back use of corporate jets and delayed work on a new Boston headquarters since taking the reins 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.
The shares fell 0.6% on Wednesday to $17.66, the lowest in almost six years. GE has plunged 44% this year. That’s easily the worst in the Dow Jones Industrial Average, which has climbed 22%.
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, S.C., and Schenectady, N.Y. GE also met with union representatives in Europe this week to discuss cutbacks there.
By Richard Clough