GE plans to cut costs
The sources claim that the layoffs will be in GE Digital based in San Ramon California and will involve about 100 sales people’
On Monday, Flannery is expected to announce a plan to cut costs and jettison some units in order to improve company profits. The layoffs are no doubt part of that plan.
Software development was central to former CEO Jeff Immelt’s strategy. However, the move has been plagued by technical difficulties that have prompted the company to shift strategy.
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GE has numerous divisions with the software division not the only one facing problems and layoffs. GE Power is also facing significant staff cuts. The healthcare and aviation businesses could also see some staff reductions.
New headquarters being built in Boston
The huge conglomerate is now 125 years old. It is in the process of moving its headquarters from Fairfield in Connecticut to Boston Massachusetts. The company has slowed construction of its new headquarters and as well has reduced staff significantly in Boston already. The move to Boston began in the summer of 2016 and is slated to be completed by 2018.
GE has 295,000 employees so even a small percentage reduction could involve thousands of jobs.
In 2017 GE ranked among the Fortune 500 as the 13th largest US firm by gross revenue.
Digital business hard hit
The digital business has about 13,000 employees. GE is cutting the number of developers as well as sales staff according to 2 anonymous sources.
DIgital sales staff were given notice recently and told they could apply for other jobs in the division or other parts of GE.
GE would not comment on specific staff reductions but spokesperson Jennifer Erickson noted that the company planned to cut $3 billion in costs by the end of 2018 and said: “Those actions include but are not limited to, employee reductions which have been well underway for many months. ‘
Restructuring and sell-off of assets coming to GE
Analysts are downgrading estimates of earnings for GE for next year. They expect a major restructuring. GE has experienced a stock slump stretching out over sixteen years.
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GE is considering divestment from a number of areas including aircraft leasing, transportation and health care information technology.
Jeff Sprague an analyst at Vertical Research Partners said: “It is also conceivable that looking out a few years, GE ceases to exist as we know it.”
Flannery became CEO only on August 1st. He has doubled the target of cost cutting for next year to $2 billion and has already trimmed costs by $1 billion this year.
Flannery claims he has found more that $20 billion in assets to sell and is looking for more changes even beyond that.
Dividend cut possible
At an investor meeting on Monday, Flannery is to present his new changes and new financial targets. His plans could also include a cut to GE’s dividend for only the third time in the country’s history of over a hundred years.
One cut was in the Great Depression, the other in the recent financial crisis.
This year alone GE stock has fallen more than 36 percent. GE has the dubious record of being the worst performer on the Dow Jones Industrial this year.
Ed Garden an activist investor in GE and a partner in founding Trian Fund Management recently joined the GE board. He invested $2.5 billion in the company back in 2015. Garden has been active in putting pressure on the company to cut costs and to focus on sectors where it is leading the market such as power plants, jet engines,. and medical devices.
Cutting out frills
Flannery has cut out frills at the top. He has grounded all GE’s corporate jets, cut car bonuses for executives, and eliminated two vice-chair positions.
Flannery also shrunk the size of the annual leadership retreat in January and moved it from a ritzy locale in Boca Raton, Florida to the company’s home city of Boston.
Investors may be somewhat heartened by Flannery’s moves as on Friday GE shares closed up 2.5 percent at $20.48.
