Home NEWS Business G.E. Cuts Jobs as It Navigates a Shifting Energy Market

G.E. Cuts Jobs as It Navigates a Shifting Energy Market

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The shifting dynamics are roiling the huge conglomerates that serve the industry. Siemens, G.E.’s main rival, said last month that it was cutting 6,900 jobs worldwide in units focused on power plant technology, generators and large electrical motors. In making the announcement, Siemens said that “the power generation industry is experiencing disruption of unprecedented scope and speed.”

The G.E. employees losing their jobs work in production and professional roles. They will notified about whether they are being let go over the next 18 months. About half are based in Europe.

G.E. said the cuts would help it save $1 billion as it moves to reduce costs by $3.5 billion this year and next across its vast businesses.

“This decision was painful but necessary for GE Power to respond to the disruption in the power market,” Russell Stokes, the head of the company’s power division, said in a statement. “We expect market challenges to continue, but this plan will position us for 2019 and beyond.”

Although G.E. estimates that its equipment generates more than 30 percent of the world’s electricity, analysts at Stifel wrote in a note to clients on Thursday that a streamlining of the power division was “long overdue” and an “obvious next step” to improve the company’s cash flow and profit margins.

“GE Power is right-sizing the business for these realities,” the Stifel analysts wrote.

John Flannery, G.E.’s new chief executive, has called 2018 a “reset year for a company that has ballooned into an enormous enterprise with stakes in medical-imaging equipment, jet engines and other sectors.

Investors have criticized G.E. for overspending, and its financial standing has suffered. The company’s stock has plunged more than 40 percent this year, the worst performance by far on the Dow Jones industrial average. Last month, G.E. said it would cut its dividend for the second time since the Great Depression.

Mr. Flannery had said he was “deeply disappointed” by the company’s third-quarter results, which were announced in October and showed a steep decline in profits and a less optimistic outlook for the year.

G.E.’s oil and gas business, which the company tried to expand just as oil prices sank, has weighed down earnings. But the power division’s poor performance was an especially nasty surprise.

G.E. is at the forefront of gas turbine technology and has a new line of large power generators that can each produce enough power for 500,000 households. But the company misjudged the market for smaller and replacement equipment and found itself with a pile of excess inventory as renewable power sources and energy conservation programs ate away at demand for gas turbines.

Two years ago, G.E. spent $13.5 billion to buy the power division of Alstom, a French company. The unit, G.E.’s largest industrial acquisition at the time, has since then “clearly performed below our expectations” and offered only single-digit returns, Mr. Flannery told investors in a conference call last month.

But, he added, the Alstom unit “is also an asset that has a 20, 30, 40-year life to it.”

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