BOSTON -- General Electric Co. (GE) will cut 12,000 jobs in its power division as alternative energy supplants demand for coal and other fossil fuels.
The company said Thursday that the cuts to both office and production jobs will help "right-size" GE Power, as traditional power markets, and the volume of the fuels that power them, decline. Cutting the number of positions will trim costs by $1 billion at GE Power in 2018, the company said.
Last month, GE announced it was slashing its dividend in half and that the conglomerate would narrow its focus to three key sectors - aviation, health care and energy. The company has said it will shed assets worth more than $20 billion in the next couple of years. It's been paring businesses for over a decade now.
The last time GE had to reduce its shareholder payment was at the height of the financial crisis in February 2009, which represented the first cut since 1938. GE, the only remaining original member of the Dow Jones Industrial Average, has paid a dividend to investors since 1899. The decision to halve the dividend represented a blow to the millions of shareholders who have come to expect that income.
More than 60 percent of GE's shares, or individuals who hold the shares in retirement or investment accounts, rather than financial firms and money managers. That raises the risk that many of those retail investors will flee because of the lower dividend.
GE's new CEO, John Flannery Jr.,and referred to 2018 as a "reset year." The question is whether he has the capability and determination to achieve the seemingly impossible goal of saving GE from total disaster.
At a, when he announced disappointing third-quarter earnings and issued lower guidance for 2017, Flannery provided a glimpse of how a new GE would be reshaped: through huge cost-cutting, asset sales, pruning of the corporate portfolio, stronger generation of free cash flow and improved earnings quality.
So far, the new CEO's strategic review has already identified several small businesses that he has deemed noncore portfolio pruning targets. They have a combined valuation of $20 billion, or 10 percent of GE's market cap. Flannery told analysts that was merely the starting point and additional businesses could be divested over the medium term.