Wednesday, November 25, 2020

GE Plans More Job Cuts in Aviation Division: Jet-engine unit’s new chief says commercial travel business will be smaller even with the promise of a Covid-19 vaccine on the horizon

The Wall Street Journal
By Thomas Gryta
Updated November 24th, 2020 8:54 am ET

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, new GE Aviation 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, adding 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 Chief Executive Larry Culp has 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 such as 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 the stock price 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.

1 comment:

  1. Larry Culp already saved GE. He'll make $230 million if he › investing › ge-ceo-larry-culp-contract
    Aug 21, 2020 — The company promised to award him shares worth $124 million if Culp boosts the stock by 200% from current levels. The big payday will come though if GE's share price spiked by 250% to $16.67. Under that scenario, Culp would cash in with shares worth more than $230 million.