GE Gives Estimations

Staff cuts, divestment, and more: CEO Flannery announces GE’s new game plan

General Electric delivered its expected overhaul Monday, a full makeover for a company with an illustrious history despite wave upon wave of recent tumult.

New CEO John Flannery, who was named to the position August 1 in succession of Jeff Immelt and who officially starts at the position beginning in 2018, made his first public address to investors Monday in the form of a detailed presentation. Flannery, who was previously head of GE’s healthcare businesses and has a total of more than 30 years of experience at the company, detailed a grand restructuring that included job reductions, a historic stock dividend cut, and the elimination and/or divestment of a few long-running GE businesses.

Flannery said GE will focus on three key industries: aviation, including jet engines; energy equipment and services; and health care products such as MRI machines. It will shrink its board of directors, and cut its dividend in half.

Sadly, two of the first units to go were two of GE’s most groundbreaking. Its railroad and lightbulb sectors, as CNN Money reported, will now live on through classic commercials only.

“This is the opportunity of a lifetime to reinvent an iconic company,” Flannery said, calling 2018 “a reset year.” Reuters reported that jobs would be cut from GE’s software division, GE Digital, based in San Ramon, California. The layoffs are expected to affect about 100 sales people in the Americas, including those who sell GE Predix, the company’s Industrial IoT software.

A major part of this restructuring—that could affect those on the ground, or at the work site—concerns those in the boardroom. The dividend cut marks only the third in company history…the previous two being during the Great Depression and the financial crisis of 2009.

While Wall Street is still weighing the specifics, the early consensus seems to be that GE stock is not a hot commodity. This could be interpreted as a “buy low” scenario for those with the luxury of waiting for what many expect to be a lengthy turnaround for investors in the company.

“GE is unloading a whopping $20 billion in assets, including its locally based transportation division, and shrinking the unwieldy conglomerate into a more manageable and, it hopes, highly profitable industrial concern,” the Chicago Tribune’s Robert Reed wrote Wednesday.

Unfortunately, the job cuts are likely ongoing. This is a company that has struggled for essentially two decades. Units including GE Power are expected to see staff cuts, while aviation and healthcare businesses could see lesser reductions, according to Reuters’, who also reported in August that corporate staff at GE’s new Boston headquarters will also suffer layoffs. The company has also slowed construction of that headquarters.

“It is not clear how many more jobs Flannery now plans to cut, or how quickly. With 295,000 employees, even a 10 percent overall reduction would eliminate nearly 30,000 jobs,” Reuters’ Alwyn Scott noted on Monday.

The full plan and investor update can be accessed here.


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