General Electric to unveil another drastic austerity plan
NEW YORK: Iconic American industrial behemoth General Electric (GE), which has lost investor confidence amid bad investment decisions, is preparing to slice up its empire again, selling major business segments and laying off thousands.
With its market capitalisation down more than US$100 billion (S$136 billion) since January, the maker of jet engines and power turbines is paying dearly after making losing bets that the energy sector, in particular oil and gas, would grow indefinitely.
Shareholders appear resigned to a cut in dividends, the first since 2009, as GE had only US$7 billion in cash flow at the end of September, but was due to pay out US$8 billion.
"There is no sacred cow," said Mr John Flannery, who has been chief executive officer for only three months, and has repeatedly stressed the need to cut costs and restructure.
He will roll out plans today to revive the company.
Deutsche Bank analyst John Inch said there was no way to sugarcoat the situation, saying: "GE is in a cash crunch."
Mr Scott Davis of Melius Research put it even more starkly, calling the company "disgraced" and saying it "needs to clean house as fast as possible".
Mr Flannery took the helm after 16 years of leadership by Mr Jeff Immelt, who sold off GE's stake in TV and movie giant NBCUniversal, its household appliance segment and much of its banking and finance business.
Mr Flannery will unveil another austerity plan that will include significant layoffs, said a source who spoke on condition of anonymity. The power-generation business GE Power will be particularly hard hit.
It follows a US$2 billion cost-cutting programme that already had seen staff levels fall 11 per cent to 295,000 over the course of last year.
GE also is likely to close its research and development centres in Shanghai, Rio de Janeiro and Munich, leaving the company with R&D facilities only in New York and Bangalore, India.
The transportation unit produces locomotives and last year had revenues of US$4.7 billion. The medical data management group led by API Healthcare and its subsidiary Centricity EMR are part of a GE branch that took in US$18.3 billion last year.
Selling these businesses could bring GE a big step closer toward its goal of shedding US$20 billion in assets over the next two years.
Another route the company could take involves spinning off its aircraft leasing operation, which maintains a fleet of nearly 2,000 aircraft.
Beyond finances, GE will have to repair damage to its corporate image following revelations that Mr Immelt secretly travelled on a corporate jet at company expense.
Experts said the practice, which was halted in 2014, was symbolic of the mismanagement, waste and lack of internal controls that led to the crisis.
Mr Flannery has promised to change the company's culture and may announce new steps in that direction.
He already has put the company jets up for sale, cancelled the corporate car service and called off the annual three-day retreat for executives that was due to occur at a luxury resort in Boca Raton, Florida. - AFP