GE to Cut 10% of Aviation Workforce as Coronavirus Grounds Airliners
March 23 2020 - 12:35PM
Dow Jones News
By Thomas Gryta and Matt Grossman
General Electric Co.'s jet-engine business will lay off about
10% of its U.S. workforce, or about 2,500 employees, one of the
first major layoffs by a big American manufacturer as the
coronavirus pandemic slows the economy.
The division, GE's largest and most profitable, also said up to
half of its maintenance and repair employees will be furloughed for
three months. The company declined to provide specific figures
around that group. The unit makes and maintains engines for planes
built by Boeing Co. and Airbus SA.
GE said the moves would save $500 million to $1 billion in
costs.
"With regard to our financial position, our company is sound,"
CEO Larry Culp said. "However, what we don't know about the
magnitude and duration of this pandemic still outweighs what we do
know."
GE had been restructuring its operations and trying to pull out
of a slump caused by weak demand for its power generation equipment
and troubles in its GE Capital unit. In recent years, GE had
slashed its quarterly dividend to a token penny per share
payout.
Before the coronavirus outbreak, GE had projected improving cash
flow from its industrial operations but its aviation unit had been
battling a slowdown in production caused by the grounding of
Boeing's 737 MAX jet.
The air-travel industry has slowed as commercial airlines have
grounded large portions of their fleets. Boeing has suspended its
dividend and drawn down its credit lines but so far avoided mass
layoffs.
U.S. employers have cut about 9,000 workers because of the
coronavirus pandemic as of Monday morning, according to data by
global outplacement firm Challenger, Gray & Christmas Inc. Most
of the mass layoffs announced so far by big U.S. employers have
come from travel and hotel operators. Many big retail chains that
have closed their stores have promised to pay workers for two
weeks.
GE said Mr. Culp would forgo his salary for the rest of 2020
while aviation CEO David Joyce would give up half his salary. Mr.
Culp hinted at more cuts to come, saying the aviation division is
working "with the appropriate parties to properly address its
global workforce."
GE expects to receive more than $20 billion in cash at the end
of March when the sale of its biopharma division to Danaher Corp.
closes. GE Aviation previously enacted a hiring freeze, canceled
merit-based raises, cut non-essential spending and made cuts to its
contingent workforce. GE had about $36 billion in cash at the end
of 2019, along with $35 billion in untapped credit lines, according
to its annual report.
The aviation division, with about 52,000 workers around the
world, has been under pressure with the grounding of Boeing's 737
MAX, which cut GE's cash flow by $1.4 billion in 2019. The division
is still important to GE's turnaround as it produced $4.4 billion
in cash flow last year.
GE's health-care division is seeing reduced demand for certain
equipment because elective procedures are getting postponed or
cancelled, the company said. The division is also increasing its
manufacturing capacity for other items including ventilators, CT
scanners and patient monitors.
GE also said it isn't seeking a government bailout. Mr. Culp
said he supports efforts to assist the "aviation industry and
protect the broader economy" but the company hasn't sought "any
provisions in stimulus bills that would benefit GE
exclusively."
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
March 23, 2020 12:20 ET (16:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Boeing (NYSE:BA)
Historical Stock Chart
From Jun 2024 to Jul 2024
Boeing (NYSE:BA)
Historical Stock Chart
From Jul 2023 to Jul 2024