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Crisis-stricken GE to unveil painful roadmap to salvation

AFP  |  New York 

Iconic American industrial behemoth General Electric, 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.

Hammered by financial markets, with its market capitalization down more than $100 billion since January, the maker of jet engines and power turbines is paying dearly after making losing bets that the energy sector, in particular and gas, would grow indefinitely.

Shareholders appear resigned to a cut in dividends, the first since 2009, as GE had only $7 billion in flow at the end of September, but was due to pay out $8 billion.

"There is no scared cow," newly installed CEO John Flannery has said repeatedly about the need to cut costs and restructure.

To rebuild trust, Flannery, who has been CEO for only three months, will roll out plans to revive the company on Monday.

Deutsche analyst John Inch said there was no way to sugarcoat the situation.

"They have a crisis of investor confidence," he told AFP. "GE is in a crunch."

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."

Flannery took the helm after 16 years of leadership by Jeff Immelt, who sold off GE's stake in TV and movie giant NBCUniversal as well as its household appliance segment and much of its banking and finance business.

The newly-installed GE chief will unveil another austerity plan that will include significant layoffs, according to a source who spoke to AFP on condition of anonymity. The power generation business GE Power will be particularly hard hit.

The belt tightening follows a $2 billion cost-cutting program that already had seen staff levels fall 11 percent to 295,000 over the course of last year.

GE also is likely to close its research and development centers in Shanghai, Rio de Janeiro and Munich, leaving the company with R&D facilities only in New York and Bangalore, India.

The company declined to answer queries from AFP on the plan, but in mid-October Flannery told CNBC: "It's a pretty straightforward thing that we have to tighten the belt.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sun, November 12 2017. 15:57 IST