GE Plans More Job Cuts in Aviation Division -- 2nd Update
24 November 2020 - 03:24PM
Dow Jones News
By Thomas Gryta
General Electric Co. warned employees that more job cuts are
coming to the conglomerate's jet-engine business because of the
pandemic's impact on commercial air travel even with the promise of
a vaccine on the horizon.
In an internal video message delivered a week before the
Thanksgiving holiday, GE Aviation's new boss John Slattery said
business conditions are difficult and the unit would need to shrink
over the next 18 months, according to people familiar with the
matter.
More jobs would be lost, he said, but the cuts would be more
focused than two rounds of layoffs earlier this year that
ultimately eliminated 25% of the division's 52,000 global
employees. Mr. Slattery didn't disclose the number of jobs that
would be cut in the video, which was reviewed by The Wall Street
Journal.
"The business revenue and profit projections not only for this
year but next year and the year after are fundamentally lower than
what we originally budgeted or expected," Mr. Slattery said from
the division's Ohio headquarters. A former executive at Brazilian
plane maker Embraer SA, Mr. Slattery took over the GE division in
September.
"Overall, particularly in our commercial sector, we'll be a
smaller business and our cost structure simply must align," he told
workers, noting that more details will come early next year.
A GE spokeswoman declined to say how many jobs would be
eliminated. "As we continue to closely monitor market conditions,
we are examining a range of options to appropriately scale our
business to match the realities of the global airline industry
recovery," she said.
GE's aviation business had $32 billion in annual sales last
year, but the pandemic and the long grounding of Boeing Co.'s MAX
jet, which runs on engines from a GE joint venture, have sapped the
business. Revenue fell 32% for the first nine months of 2020.
GE CEO Larry Culp has previously said the division faced a
multiyear turnaround, but the new round of cuts demonstrates the
long road to recovery for certain corners of the economy where job
losses aren't yet over.
"The promise of the vaccine certainly brings hope but it's not
coming as fast as we'd like," Mr. Slattery said in the internal
video.
GE's profit plunged in recent years, dragged down by problems in
its financial-services unit and its core power business, prompting
it to overhaul its management, board and corporate structure. Mr.
Culp joined the board in early 2018 and became CEO later that year.
The company has cut its dividend to a token penny a share, sold
major businesses like transportation and oil, along with a major
part of its health-care division.
Investors were encouraged by GE's third-quarter results last
month that showed another quarter of shrinking revenue, but a
smaller loss and positive cash flow from its industrial
operations.
GE shares are up 32% in the past month to $10.07, putting it at
levels not seen since early March. The S&P 500 index is up 3.2%
in the same period. After selling assets, GE made its first
acquisition in years last week when its health-care division bought
a diagnostics technology company for an undisclosed amount.
Mr. Slattery told employees the cuts coming to the aviation
operation would give it a better cost structure to help its
long-term health. "When we come out the other end of the storm, we
will be prepared to address the upturn and the surge that will
materialize," he said in the video.
GE Aviation, which is based in Cincinnati, has major factories
in Lynn, Mass., Asheville, N.C., and Lafayette, Ind. It makes the
MAX engines in a joint venture with France's Safran SA. The Federal
Aviation Administration recently cleared the MAX to return to
passenger service.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
November 24, 2020 09:09 ET (14:09 GMT)
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