GE Plans to Cut 12,000 Employees in its Power Business

---

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Power business at General Electric (NYSE:GE) (Boston, Massachusetts) plans to reduce its staff by about 12,000 in a global response to a slowdown in fossil fuel-related work, the company announced Thursday. The job losses could amount to 20% of the company's Power employee base worldwide. Europe will absorb about half the job losses, a GE spokesperson told Industrial Info, and the remaining 6,000 job losses will be spread around the rest of the globe. Professional staff as well as production-line employees will be affected. But the cuts do not apply to GE's Renewable Energy segment, the spokesperson said.

In a statement announcing GE Power's job cuts, the company said, "The plans announced today are driven by challenges in the power market worldwide. Traditional power markets including gas and coal have softened. Volumes are down significantly in products and services driven by overcapacity, lower utilization, fewer outages, an increase in steam plant retirements, and overall growth in renewables."

"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," Russell Stokes, president and chief executive of GE Power, said in a statement. "Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond."

"At its core GE Power is a strong business," Stokes continued. "We generate more than 30% of the world's electricity and have equipped 90% of transmission utilities worldwide. Our backlog is $99 billion and we have a substantial global installed base. This plan will make us simpler and stronger so we can drive more value for our customers and investors."

The closure of coal plants around the world cost GE after-market maintenance business. In the U.S., tens of thousands of megawatts (MW) of coal-fired generation have been retired in recent years, and virtually no new coal-fired power plants have been built to replace those shuttered units. Development of gas-fired power plants remains a brisk business in the U.S. and abroad, but GE battles numerous global competitors for that business. New-build nuclear development has stalled in the U.S., the result of cost overruns and delays. And while renewable energy remains a growing business, declining costs likely are squeezing margins for equipment suppliers like GE. And all forms of power generation are facing competitive challenges from energy efficiency and other customer programs designed to reduce or shift electric use.

In its statement, GE said its staff reductions, combined with actions taken previously in 2017, will position the Power unit to reach its announced target of $1 billion in structural cost reductions in 2018. Across all its business lines, GE is seeking to lower structural costs by $3.5 billion in 2017 and 2018.

In the third quarter, profits fell 51% at GE Power, to $611 million, on revenue of $8.68 billion. Revenue was down 4% compared with the comparable year-earlier quarter. The company also nearly halved its overall corporate cash flow outlook to $7 billion for full-year 2017 and halved its common-stock dividend, only the second time the dividend has been cut since the Great Depression. A big part of that GE's overall financial decline stemmed from GE Power.

Under prior leaders Jeff Immelt and Jack Welch, GE become a much-admired global industrial and financial conglomerate, with businesses stretching from light bulbs, home appliances, power generation and television networks to aircrafts, locomotives, financial services and medical technology. But that portfolio has proven to be unwieldly in recent years, and disappointing performance hastened Immelt's departure as chairman this past October. Last month, GE's new chief executive, John Flannery, announced plans to narrow GE's portfolio.

News reports following Thursday's announcement said nearly a third of the company's 4,500-strong Swiss workforce could be cut, while 16% of staff in Germany is also likely to be axed. In Britain, about 1,100 positions will be affected. Overall, GE employed 295,000 people worldwide at the end of 2016.

One of GE's competitors, Siemens AG (Munich, Germany), recently announced it was letting about 6,900 employees go, close to 2% of its global workforce. Many of the staff cuts reportedly will be made in the company's power and gas group, which, like GE, has been coping with a reduction of fossil-fuel work and the growth of renewable energy. Siemens has a robust renewable energy group, and that unit is not expected to shrink.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.