From John Cropley at the Schenectady Gazette
GE Power on Thursday announced it will reduce its workforce by about 12,000 people as it strives to make the $1 billion in cost cuts mandated by General Electric CEO John Flannery.
GE Power did not say where the cuts will be made, but multiple media outlets reported they would mostly come in Europe, rather than in the United States. GE Power has already made a series of much smaller workforce reductions this year at its headquarters in Schenectady, where about 4,000 people work, most of them for GE Power.
GE Power spokeswoman Katie Jackson would not say where the personnel reductions would be made, nor what other cost cuts would be undertaken to reach the $1 billion savings target.
With Thursday’s cuts, General Electric took the lead in 2017 job cuts by U.S. companies: A total of 19,242, according to the calculations of Bloomberg News. With three weeks to go for the year, General Motors is No. 2 in job cuts and Macy’s No. 3.
A few round numbers are being floated for the 12,000 jobs GE Power plans to eliminate: Reuters reported that 1,600 jobs will be cut in Germany, 1,400 in Switzerland and 1,100 in Britain. Bloomberg reported that GE Power is not making job cuts at this point in France because of an agreement General Electric made with the French government when it purchased the power-generation business of Alstom.
In his Nov. 13 address to shareholders, Flannery noted that GE Power had 153 manufacturing, repair and service sites and suggested this was an area where efficiency could be increased.
In announcing the “global headcount reduction” Thursday, GE Power cited challenges in the electrical power generation market worldwide. Demand for fossil fuel power products has decreased, it said, as renewable energy has grown. GE Power said it is shrinking its footprint and structure to match this environment and is focusing on “improving operational excellence.”
“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 CEO of GE Power, said in a news release. “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,” he said. “We generate more than 30 percent of the world’s electricity and have equipped 90 percent 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 plant at the foot of Erie Boulevard in Schenectady manufactures steam turbines and generators, and has a significant backlog of work.
The job reductions made there this year have affected salaried managers and professional workers, not the hourly wage workers who do the manufacturing work.
GE Power said the 12,000 job cuts announced Thursday will affect both professional and production workers.
General Electric is working to cut costs by $3.5 billion companywide, increase profitability and boost stock value. The cuts GE Power announced Thursday didn’t yield much progress toward that third goal: GE’s share price rose only 5 cents, closing at $17.71, still near its 52-week low. As a percentage, that was a hair less than the Dow Jones Industrial Average increase. GE stock has plunged 44 percent this year even as the Dow as a whole has risen 22 percent.
In another cost-cutting move, General Electric cut its stock dividend in half last month, only the second such reduction since the Great Depression.
General Electric has about 300,000 employees in more than 100 nations around the world. GE Power was the conglomerate’s biggest component business in 2016, with sales of $26.8 billion, Bloomberg reported. The total would have been $36.8 billion after accounting for the effects of a reorganization this year in which General Electric added some energy businesses to the unit, Bloomberg said.