General Electric plans to cut 12,000 jobs in its power division as the industrial conglomerate’s new CEO institutes sweeping changes and the company grapples with a decline in business for coal and natural gas products, USA Today reports.
The Boston-based company said Thursday that its GE Power unit would make the cuts. It was not immediately clear where and when the reductions would occur.
The move comes as CEO John Flannery, who took over for Jeffrey Immelt in August, is aiming to make GE more efficient. He has already earned a reputation for taking a microscope to GE’s global business to identify opportunities for savings and changes.
GE said the cuts would contribute to its plans to slash $3.5 billion in “structural costs” in 2017 and 2018. That includes a $1 billion cost-cutting plan in 2018 by the GE Power division, which makes gas and steam turbines, electrical distribution products, nuclear plant infrastructure and other items.
“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 CEO Russell Stokes 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.”
The company said coal and gas product sales are down because of “overcapacity,” lower usage, growth in renewable energy and other factors.
Under Immelt, the company had already started getting smaller, having dramatically reduced its GE Finance division and sold the broadcasting division unit, appliances division and other assets. One exception was the company’s recent acquisition of oil services firm Baker Hughes.
But Flannery has accelerated the pace of change, including by recently reducing the company’s vaunted dividend.
“We’ve done an exhaustive review of the business,” he told analysts in November. “I knew a lot about the company obviously from 30 years in it, but we have really gone to the floorboards on the operations of the company. … Now we have to implement.”
In the GE Power division, he spotted trouble.
“We have a challenge in our Power business, and that is something we have to resolve,” Flannery said, acknowledging “we did a poor job running that business.”