Crisis-stricken GE to unveil painful roadmapto salvation
New York, US - 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.
Hammered by financial markets, with its market capitalisation down more than US$100bn 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$7bn in cash flow at the end of September, but was due to pay out US$8bn.
"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 Bank analyst John Inch said there was no way to sugarcoat the situation. "GE is in a cash crunch," he said.
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 NBC Univer- sal 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. The power generation business GE Power will be particularly hard hit.
The belt tightening follows a US$2bn cost-cutting program 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 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."
The company expects to cut more than US$2bn in additional costs, according to another person familiar with the matter, and also may announce the sale of its transportation and medical IT segments.
The transportation unit produces locomotives and last year had revenues of US$4.7bn. The medical data management group led by API Healthcare and its subsidiary Centricity EMR, are part of a GE branch that took in US$18.3bn in 2016.
Selling these businesses could bring GE a big step closer toward its goal of shedding US$20bn in assets over the next two years.
Another route the company could take involves spinning off its aircraft leasing operation GE Capital Aviation Services, which maintains a fleet of nearly 2,000 aircraft. "GE will likely sell anything that isn't nailed down," Davis said.
Beyond its financial picture, GE will have to repair damage to its corporate image following revelations that former CEO Immelt secretly traveled on a corporate jet at company expense.