The streamlining of General Electric continued Thursday as the conglomerate announced it will cut 12,000 jobs at its power unit to help save $1 billion.

The layoffs will cut nearly one in five positions at GE Power, which has been hit by overcapacity, the growth of renewables, and the “softening” of traditional power markets. GE had a workforce of about 295,000 at the end of 2016.

GE Power “has been a major source of pain for the struggling company as global demand has dropped in tandem with GE integrating its acquisition of Alstom SA’s power business,” The Wall Street Journal reported. “The company has said it misjudged the market as volume dropped in traditional coal and gas-fired power, while renewable energy sources grew.”

The power business makes gas and steam turbines, electrical transmission products, nuclear plant infrastructure and other items. Its revenue declined 4% in the latest quarter, while operating profits dropped 51%.

According to GE, the job cuts will position GE Power to reach its target of $1 billion in structural cost reductions in 2018. GE is aiming to reduce overall structural costs by $3.5 billion in 2017 and 2018.

“This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services,” Russell Stokes, GE Power’s chief executive, said in a news release. “Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond.”

GE started its streamlining process under former CEO Jeff Immelt, but as USA Today reports, his successor, John Flannery, “has accelerated the pace of change, including by recently reducing the company’s vaunted dividend.”

The downturn in the gas turbine business also recently forced German manufacturing giant Siemens to announced plans to lay off close to 2% of its global workforce.

“At its core GE Power is a strong business,” Stokes said. “We generate more than 30 percent of the world’s electricity and have equipped 90 percent of transmission utilities worldwide.”

, , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *