GE GE Aerospace

By Thomas Gryta 

General Electric Co. promised to cut an additional $1 billion in costs from its industrial operations over two years and to more closely tie top executives' bonuses to profits in its core business.

The changes outlined Wednesday follow discussions with activist investor Trian Fund Management, which has been pressuring the conglomerate to boost profits.

On Wednesday, GE said it would target $17.2 billion in operating profit in 2017 and planned to reduce its industrial expenses to $23.9 billion. It plans to cut another $1 billion in spending in 2018. The new cost-cutting goal is twice as much as laid out by GE CEO Jeff Immelt in a January earnings conference call.

Following talks with Trian, the GE board changed the bonus plan for Mr. Immelt and his direct reports so they could be sweetened or reduced by as much as 20% based on whether the company reaches those two profit and cost targets. Last year, GE's executive compensation plan paid only 80% of its target because the company missed profit targets.

Trian said it was pleased with the new framework and that GE should continue "simplifying and streamlining" its organization to achieve financial goals. "We will continue to hold management accountable to its commitments," Trian said.

The firm took a $2.5 billion stake in GE in late 2015 and had expressed support for the company's plan to divest most of its lending business and refocus on making jet engines, power turbines and other heavy equipment. But recently Trian has been frustrated by missed profit goals, according to people familiar with the matter.

In recent years, the conglomerate has refocused on its industrial businesses, shedding low-margin units like home appliances and striking a big oil-and-gas deal with Baker Hughes Inc. last fall. But analysts have recently warned the company is unlikely to reach a long-term goal to deliver $2 a share in profits in 2018.

To find more cost cuts, GE says it has been discussing new cost moves since December. The cuts are focused on four areas, including shrinking headquarters staff, centralizing information-technology operations, reducing research spending and accelerating cuts in discretionary spending like internal travel.

A GE spokeswoman declined to comment on how many jobs could be affected. GE employed 104,000 people at the end of last year, compared with 125,000 at the end of 2015.

--Austen Hufford and Ted Mann contributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

March 22, 2017 12:01 ET (16:01 GMT)

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