Embattled industrial giant General Electric announced a massive restructuring plan on Monday that includes thousands of job cuts and sales of some units as the new management tries to right the corporate ship.
Newly-installed CEO John Flannery rolled out the plan to investors in New York, describing a moment of reckoning for the company amid falling revenues, a steep drop in share price and accusations of corporate waste and mismanagement.
With its market capitalization down by more than $100 billion since January, the 125-year-old maker of jet engines and power turbines will shed about $20 billion in assets, selling off parts of its transportation and electricity businesses, as part of the turnaround to narrow the conglomerate's focus to aviation, healthcare and energy.
It also slashed its quarterly dividends in half to 12 cents, will reduce the number of seats on the board to 12 from 18 beginning in April, and will tie executive pay to results.
"We have not performed well for our owners," Flannery said. "That is unacceptable and the management team is completely devoted to doing what it takes to correct that."
Chief Financial Officer Jamie Miller said the company will cut the corporate workforce by 25 percent. Currently about 24,000 employees, that means at least 6,000 job losses in that division alone.
Beyond that, the company has not yet provided details of the layoffs, or the other countries or units that will be impacted, referring broadly to "workforce reductions" through cost cuts, cessation and consolidation.
But GE Power, which includes Alstom, will undergo a major overhaul to cope with the changes in the energy market.
Flannery said the Alstom energy business, which GE bought in 2015 for $13.5 billion in the company's largest-ever acquisition, was "disappointing."
"Alstom has fallen below expectations," he said. He praised the unit's employees but lamented its poor performance in renewable energy and the time needed to close the deal.
"We didn't have a clear view of the market," he added in thinly veiled criticism of his predecessor Jeff Immelt, whom Flannery replaced in August.
GE also will shed its majority stake in the oilfield services company Baker Hughes.
- 'Complexity has hurt us' -
Flannery said the turnaround plan would deliver a "simpler, more-focused GE."
"Complexity has hurt us," he said.
The shift favors the conglomerate's strongest divisions: aviation, energy and health (medical equipment and services). Those units employed 156,000 people at the end of 2016, and represented 57.7 percent of overall revenues that year, which amounted to $123.7 billion.
Immelt, the former CEO, faced biting criticism for having failed to foresee dropping demand for equipment and technology in oil and gas sector amid tumbling energy prices.
But strong demand in the commercial transport sector has put wind in the sails for GE's aviation business.
GE was due to pay out $8 billion in dividends but by September had cash flow of only $7 billion. Flannery said such hefty payouts no longer made sense.
Flannery said he recognized the dividend cut would hurt those shareholders most who relied on dividends for current income, acknowledging "the gravity of this decision and the effect it has on many people."
"We understand this is an extremely painful action for our shareholders," Flannery said, adding that the decision was made "after extreme deliberation and consideration of what the alternatives were."