General Electric Co plans to cut as many as 4,500 jobs in Europe as the U.S. industrial conglomerate shrinks its troubled power generation business, a labor union source said on Tuesday.
The cuts, which are linked to businesses GE bought from France's Alstom in 2015, will affect employees in Switzerland, Germany and Britain, said French newspaper Les Echos, which first reported the news on Tuesday.
The union source confirmed the layoff numbers to Reuters on Wednesday and said an official announcement was expected as early as Thursday.
GE did not confirm the numbers but said it was "reviewing its operations to ensure the business is best positioned to respond to our market realities and for long-term success." The company had presented a proposal to the European body representing legacy Alstom employees, it added.
Last month, GE Power Chief Executive Russell Stokes said the company could reduce its global footprint by 30%.
GE shares were down less than 1% on Wednesday afternoon. The stock has fallen about 44% since the start of the year and is the year's worst performer on the Dow Jones Industrial Average.
GE acquired about 65,000 Alstom employees, $20 billion in annual revenue and dozens of field offices and manufacturing sites around the world when it bought the power assets of the French company in 2015, according to regulatory filings and presentations at the time.
The acquisition rounded out GE’s Power portfolio by adding steam turbine capabilities, adding to GE’s mostly natural gas turbine power business. It also gave GE a larger installed base of plants to service. But the deal came just as demand for new power plants was slowing, in part due to competition from cost-competitive wind and solar systems.
Last month, General Electric CEO John Flannery outlined plans to cut back GE's power business to respond to a sharp fall in demand for fossil fuel power equipment. GE did not specify how many jobs would be cut or where.
The reported layoffs are part of GE Power's plan to integrate GE's energy connections and power businesses, seeking to save $1 billion in costs next year and another $500 million in 2019, William Blair analyst Nicholas Heymann said.
"Renewables will not have any reductions because the world is rapidly shifting from fossil to renewables as the cost of temporarily storing power becomes more affordable at $100/Kw for power packs," Heymann added, referring to GE's renewable energy business.
Due to the weakness in its power business, GE last month lowered its earnings forecast and slashed its dividend by half, expecting to save about $4 billion in cash annually.
GE aims to reduce overhead costs by $1 billion this year and $2 billion in 2018 as Flannery, who took the top job in August, prepares to refocus the 125-year-old conglomerate toward aviation, healthcare and power.
GE has already shed 25% of its corporate staff or some 1,500 jobs around the world.
Flannery's plans include hiving off at least $20 billion of assets through sales, spin-offs or other means and retaining only business that offer growth, a leading market position and a large installed base. (Reuters)