General Electric Co.’s new chief executive, John Flannery, on Monday outlined steps that will turn the giant industrial conglomerate into a smaller, more focused company.
Flannery said he will pare GE down to three core businesses: power, aviation and healthcare, with a focus on “restoring the oxygen of cash and earnings to the company, Reuters reports.
The transition includes GE getting rid of at least US$20 billion of assets through sales, spin-offs or other means.
GE will jettison businesses with “a very dispassionate eye”, keeping only units that offer growth, a leading market position and a large installed base, said Flannery, who took over as CEO on Aug. 1.
The company will exit lighting, transportation, industrial solutions and electrical grid businesses, moves which were widely expected. But it was vague about other disposals, the report said.
The company aims to reduce overhead cost by US$2 billion next year, half of that at its troubled power unit that sells electrical generation equipment.
GE plans to get rid of its 62.5-percent stake in oilfield services company Baker Hughes, only months after making the multi-billion dollar investment.
Flannery offered no quick fixes for investors. He said power, one of the businesses GE would focus on, was “challenged,” but could be turned around in one to two years.
GE’s digital unit will focus on selling apps to customers in its core businesses, Flannery said. He confirmed that the shift meant sales staff were being let go, as Reuters reported last week.
Flannery added that some of its healthcare IT business, such as software for imaging and hospital staff scheduling, were still critical to the company and not likely to be divested.
He will keep predecessor Jeff Immelt’s strategy of building software to complement GE’s machinery, albeit with a narrower focus and reduced budget.
Flannery’s plan to shrink GE’s multi-industry array of businesses was a reversal of the deal-driven empire building of his predecessors, Reuters noted.
On Monday, GE also announced that it is cutting its dividend as well as its 2018 earnings forecast by half.
Following the news of the dividend cut and concerns about the years-long business overhaul, GE shares fell to their lowest level in more than five years.
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