General Electric Co said Thursday it is axing 12,000 jobs at its global power business, the struggling industrial conglomerate's latest effort to shrink itself into a more focused company.
The US company, whose stock has plunged 44 percent this year, launched the cuts to save $1 billion in 2018, saying it expected dwindling demand for fossil fuel power plants to continue. GE did not give a detailed breakdown of the job cuts, which represent about 4 percent of its overall workforce, saying only that they would be primarily outside the United States.
The announcement cast a shadow over GE's decision to spend 9.7 billion euros ($10.7 billion when the deal closed in 2015) on the energy business of France's Alstom. The deal was intended to round out GE Power's portfolio by adding steam turbine capabilities to its mainly natural gas turbine power business. But the purchase came just as demand for new power plants was slowing, in part due to competition from wind and solar systems.
"Traditional power markets including gas and coal have softened," GE said on Thursday, explaining the decision for the job cuts. Rumours of sweeping job cuts were confirmed by labour union sources on Wednesday, with staff in Switzerland, Germany and Britain among those badly hit. "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," said Russell Stokes, head of GE Power.
"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." GE shares, part of the Dow Jones Industrial Average, were up 0.5 percent at $17.75 in early trading.
SHRINKING EMPIRE
New GE Chief Executive John Flannery last month outlined plans to shrink GE's sprawling empire of businesses built up by predecessors Jeff Immelt and Jack Welch, whose strategy was based on spreading risk across a broad range of industries. GE has previously said it would exit its lighting, transportation, industrial solutions and electrical grid businesses. It also plans to ditch its 62.5-percent stake in oilfield services company Baker Hughes.
In Thursday's layoffs, nearly a third of the company's 4,500-strong Swiss workforce could be cut, while 16 percent of staff in Germany are also likely to be axed. In Britain, around 1,100 position will be affected, the company said. Globally GE employed 295,000 people worldwide at the end of 2016, according to the company website. GE said it had begun talks with labour leaders about the steps.
Union leaders in Germany reacted angrily to the job cuts.
"The announcement by GE that it wants to cut thousands of jobs across Europe is neither strategically nor economically justifiable," said Klaus Stein, the representative of the IG Metall Union at GE's plant in Mannheim. "We are not going to accept this, and we will fight ... to preserve jobs." Demand for new thermal power plants dramatically dropped in all rich countries, GE said, while traditional utility customers have reduced their investments due to market deterioration and uncertainty about future climate policy measures.
Hardly any new power station projects had been commissioned in Germany in recent years, GE said. Heightened Asian competition had also increased price pressures. The downturn has not only affected GE. Rival Siemens is cutting about 6,900 jobs, or close to 2 percent of its global workforce, mainly at its power and gas division, which has been hit by the rapid growth of renewables.
