General Electric chairman and CEO John Flannery’s efforts to streamline his organization and reduce overall structural costs by $3.5 billion in 2017 and 2018 continued with the announcement today that GE Power will cut 12,000 jobs worldwide.
The move will help GE Power reach its announced target of $1 billion in structural cost reductions in 2018, according to GE Power CEO and chairman Russell Stokes.
“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,” Stokes said in a statement announcing the layoffs. “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.”
In addition to the cost reduction goals, challenges in the global power market are fueling changes at GE Power. The company says “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.”
GE announced it would be cut its dividend in half last month and dropped its profit targets. The company has also announced the shutdown of research centers in Munich, Rio de Janeiro and Shanghai as part of its restructuring plan, has pulled the plug on private air travel by grounding GE’s business jet fleet last August, and will end corporate car perks for 700 or so senior GE executives by the end of 2018.
Here’s a roundup of reactions to the news:
- MSNBC reports that Switzerland and Germany will bear the brunt of the staff reductions, saying that “a third of the company’s Swiss workforce face layoffs, while 16 percent of its staff in Germany are also likely to be axed in the shake up.”
- The Wall Street Journal highlights instability in the larger coal and gas power ecosystem, with GE competitor Siemens announcing 6,900 layoffs last month.
- Fox Business says shirking demand and GE’s troubles with integrating its acquisition of Alstom SA’s power business are what’s behind the division’s woes.
- Reuters is reporting that 1,100 of the jobs cut at GE power will be in the United Kingdom.
- U.S. News & World Report says no facilities are expected to close in Switzerland, though the GE Power Conversion unit in Berlin and GE Grid Solutions in Moenchengladbach, Germany will be shut down.