General Electric saw its shares rise 2.5% on Friday ahead of an expected announcement tonight, our time of a plan from its new CEO to improve the company’s sagging financial performance.
The fading giant’s plan will need to be dramatic enough to convince investors who see GE as a symbol of America’s past and not its future which is exemplified by the likes of Apple, Google, Netflix and Facebook.
CEO, John Flannery is due to present the strategic changes and new financial targets at an investor meeting in New York tonight, our time.
The plans also could include cutting GE’s dividend of 96 cents a share for only the third time in GE’s history. The other two were during the Great Depression and the financial crisis.
The 125-year-old conglomerate is looking at job reductions across all of its diverse businesses, media reports have been saying for the past month.
Struggling units such as GE Power are facing significant staff cuts, while aviation and healthcare businesses could see smaller reductions, the reports have said.
GE is considering selling its aircraft leasing, transportation and healthcare information technology businesses. The job reduction efforts in GE’s units appear to be separate of those divestitures, the media reports said.
Some analysts speculate that Warren Buffett’s Berkshire Hathaway could be a buyer of parts of GE, especially high tech operations that fit Berkshire’s Precision Castparts business.
GE has been struggling for years to regain its momentum, but the last 12 months has been a year of disappointing performance that has some analysts predicting that the company’s time is up and it needs radical surgery to survive.
That has pressured GE’s share price, after it spent years as an investor favourite due in part to the payout of 96 US cents a share.
Since the beginning of the year, GE shares have fallen almost 37%.
GE’s 2.5% jump on Friday to $US20.49 put it at the top of the performers on the Dow for the day.
Reuters reported over the weekend that layoffs had started at GE Digital, based in California, with about 100 sales people in the Americas, being sacked. Software developers in this business are also being cut.
It is not clear how many jobs Flannery will cut, or how quickly. With 295,000 employees, even a 10% slice would see nearly 30,000 jobs lost around the world.
The job cuts will be central to the company’s planned $US3 billion in cost cuts by the end of next year.
Since replacing Immelt at the start of August, Flannery has doubled the amount of cost cutting targeted for next year to $US2 billion, and is cutting $US1 billion this year.
He said he has found more than $US20 billion in GE assets to sell and is looking at further changes to the portfolio beyond that. Is that where Buffett might be interested?