Siemens AG (USOTC:SIEGY)
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By Allison Prang and Thomas Gryta
General Electric Co. said Thursday it was cutting 12,000 jobs in its power business, or nearly 20% of the unit's workforce, as the conglomerate slashes costs and battles overcapacity in its core business.
GE Power said the cuts "are driven by challenges in the power market worldwide" and cited softening markets like coal and gas. The move is part of a broader reorganization by the conglomerate, which last month cut its dividend by half and sharply lowered its profit targets.
The business, which makes turbines for coal and gas-fired power plants, is GE's largest by both revenue and number of employees. It generated about $27 billion in revenue last year employed 57,000 people at the start of the year. Its biggest rival Siemens AG said last month it would cut about 6,900 jobs to combat weak demand.
"This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services," GE Power Chief Executive Russell Stokes said in prepared remarks. He said the company anticipates those challenges continuing.
GE CEO John Flannery, who took over in August, is focusing on GE's aviation, power and health-care divisions as he implements a sweeping turnaround effort at the 125-year-old conglomerate. At the end of 2016, GE had around 295,000 employees.
The company's power unit has faced problems with too much inventory and management's assessment of the market. Former CEO Jeff Immelt had made attempts to grow GE's power division through M&A, including the 2015 acquisition of power assets from Alstom SA.
Both GE and Siemens have been caught unprepared for governments' and companies' shift away from large, fossil fuel-powered plants to renewables, which make electricity in a decentralized way and without the need to move massive amounts of steam through one of the companies' turbines. Meanwhile, gas-powered plants haven't picked up the slack from embattled coal and nuclear businesses as quickly as both Siemens and GE had anticipated.
GE is hoping to cut $3.5 billion in structural costs this year and next. Mr. Flannery also wanted to step back from certain businesses, like GE Lighting and its transportation division. Year to date, the company's shares are down 44%. Shares of GE were up 0.3% in premarket trading.
Cara Lombardo contributed to this article
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(END) Dow Jones Newswires
December 07, 2017 08:02 ET (13:02 GMT)
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