GE GE Aerospace

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.