General Electric Co. took yet another step in its plan to become a smaller and more focused company, and many people will lose their jobs because of it.
Trying to save $1 billion in its Power business, the company announced that it was cutting 12,000 jobs. It announced this while stating that it expected demand for its fossil fuel power plants to continue to fall. The news comes as utility companies around the world are switching from fossil fuels to renewable energy sources such as wind and solar, and just after rival Siemens AG announced that it was eliminating nearly 7,000 jobs.
The stock market reacted favorably to the news, with GE trading 1.4% higher, to $17.92 per share.
The layoffs represents 4% of GE’s global workforce of 295,000 employees, and 18% of its Power business. While it did not break down the cuts, it did say that most of them would be in locations outside of the United States. Based on information collected from labor unions across the world, Switzerland, Germany and the United Kingdom are among the countries to see the biggest cuts. Nearly a third of GE’s 4,500 Swiss workers will be out of a job, and 16% of GE’s German workforce will be cut as well. French jobs, though, appear safe, because of an agreement GE made with Alstom, the French company GE purchased in 2015 for nearly 10 billion euros.
British union Unite believes that 1,100 jobs could be lost, and they said that they would vigorously oppose the cuts. German unions also said that they would fight the losses. GE, though, defended the cuts, and data from leading industry analysts seem to support them. These analysts believe that GE could sell 110-120 gas turbines per year, but they currently have the capacity to build four times that many. What’s more, very few power plants in Germany have begun construction in recent years, and demand for new thermal power plants have fallen in all developed nations. Making matters even worse, traditional utilities have reduced their investments in such plants, especially in light of new climate change regulations.
Russell Stokes, who is the head of GE Power, said that GE needed to “respond to the disruption in the power market,” but he added that he believed their current plan would see them through not just the coming years but long afterward.
The layoffs at GE are just part of a plan new CEO John Flannery detailed last month. He wants to shrink the once mammoth company built by former chiefs Jeff Immelt and Jack Welch, who both believed that building an empire of diverse industries would mitigate risk. In addition to cuts in its Power business, GE has already announced that it will get out of a large array of other industries. These include lighting, transportation, industrial solutions, electrical grid businesses, and oilfield services.