GE/Wabtec Drama

GE sells BioPharma life sciences unit; merges transpo with Wabtec

General Electric is showing resilience yet again. The iconic company made serious noise with the assets sale of BioPharma, its life sciences unit, to Danaher for $21.4 billion on Monday, and then inked a merger of its transportation sector with Wabtec on Tuesday. Equally moving was the reaction of GE stock, which jumped 6.4 percent to $10.82 at the close in New York, the highest level since Oct. 29. The shares have advanced 43 percent this year, the best performance on a Standard & Poor’s sub-index of U.S. industrial companies.

GE Life Sciences is under the conglomerate’s healthcare banner, and includes medical imaging equipment and what GE likes to call “pharmaceutical diagnostics enhancement”. “Products and solutions that facilitate research into fundamental cell and protein biology and the development and production of biologic drugs, vaccines and cell therapies,” fall under BioPharma, while “contrast media, molecular imaging agents and related consumables that enhance diagnostic imaging procedures,” fall under pharmaceutical diagnostics. The two make up the bulk of the Life Sciences unit.

In a deal being called “a win-win”, D.C.-based Danaher is paying $21 billion even in cash along with $400 million in pension liabilities, a crucial stipulation of the deal. This detail a) Eases GE’s debt stressors by way of cash injection into what Bloomberg’s Brook Sutherland called “one of the biggest underfunded pension liabilities on the S&P 500,” at the embattled company. Sutherland also mentioned the sale of the life sciences unit demonstrates momentum not currently seen, but sought, in GE’s aviation or power units.

First-year CEO Larry Culp also garners credit for the sale, as he impressed analysts on Wall Street with this one by living up to his word to be more aggressive since taking over General Electric in October, specifically with some of the company’s core units. Culp has already announced an overhaul of the ailing power-equipment business, stepped up cost cuts and revamped a divestiture of GE’s locomotive unit to increase cash potential

And then, on Tuesday…

Talk about an encore: General Electric dominated business—and this time workforce—headlines again Tuesday when it merged its railroad unit with Wabtec. The real drama arose when Wabtec factory workers in Erie, Pennsylvania responded to the news by immediately going on strike, with around 1,700 union workers walking off the site. Being protested are issues linked to new ownership’s outline for a plan that includes mandatory overtime and pay cuts for new hires.

The famed GE locomotive unit—formerly known as GE Transportation—is more than a century old. Meanwhile, Wabtec began as a brake manufacturer (its origins stem from the original Westinghouse Air Brake Company) and then has since focused on being the source of all things railroad. The company has been buying relevant components over the past decade. In 2011, it acquired Fulmer Company, a leading manufacturer of motor components for rail, power generation and other industrial markets based in Export, Pa.

The Wabtec strike came hours after the latest round of talks, which began Monday afternoon, broke off sometime after midnight Tuesday. The video above from reporters takes you on the ground.

Union members at what was then GE Transportation last struck in 1969 and were on the picket lines for 102 days. Union members since then have staged short-term walkouts of several hours, but never a plantwide strike.

“About 1,700 union workers at Wabtec’s newly acquired locomotive factory in Erie, Pennsylvania, walked off the job on Tuesday morning. Workers at that factory haven’t organized an open-ended strike since the 1969-1970 GE-wide strike that cost the conglomerate dearly.
United Electrical union representatives and Wabtec (WBC) failed to reach a short-term agreement that would have kept in place the working conditions negotiated with GE (GE), the factory’s longtime former owner,” CNN Business

Wabtec replied with a concrete stance mirroring its previous commitments. “No one benefits from a walkout,” the company said in a statement Tuesday. “No one ever benefits from a walkout. Employees lose wages and the company’s ability to deliver products to customers on time is jeopardized.

“Wabtec looks forward to returning to normal operations. We are proud to be an active community partner in Erie that offers our employees highly desirable jobs, benefits and retirement benefits.”

Here’s a handy infographic with the figures from the merger:

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