General Electric Unveils Restructuring
Struggling American industrial giant, General Electric will slash its dividend by 50%, focus on three of its biggest business lines, may sell down its 60% plus stake in Baker Hughes, the third biggest US oil services group, but won’t break up the company completely.
In a briefing overnight the revamp, announced by CEO John Flannery stops short of radical restructuring of the 125-year-old giant. But the quarterly dividend will be cut in half to 12 US cents a share. It will the lowest quarterly dividend since 2010.
Mr Flannery said in the statement: “We understand the importance of this decision to our shareowners and we have not made it lightly. We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation.”
Mr Flannery said GE’s underlying earnings per share, which the company had been targeting at $2 for next year, are now expected to be in a range of just $US1-$US1.07, little changed from this year’s expected earnings of $US1.04-$US1.12.
That news saw the shares fall a further 8% at one stage on Monday taking the fall for the year so far to nearly 40%. Some US investors worry the asset sales and slimming will see GE’s earnings fall too sharply.
He will focus on GE’s aviation, power and health-care divisions. The CEO will look to exit most of the rest of its operations. Around a dozen business in all will be sold.
That means GE will off its transportation unit, one of the oldest and biggest makers of diesel locomotives, as well as GE Lighting, which traces its roots to back Thomas Edison and makes LED bulbs and energy management sensors.
The company may eventually shed its majority stake in Baker Hughes, which became a separate public company in July after merging with GE’s oil and gas operations. Baker Hughes is worth more than $US37 billion and its sale could finance a lot of the restructuring Flannery reckons GE needs.
As part of the overhaul, GE is also planning to shake up its board, while three new directors will be found, the total will be cut to 12 from 18 at the moment.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.