General Electric plans to eliminate 6,500 jobs in Europe in a global restructuring effort as the industrial giant seeks $3 billion in cost savings from its purchase of Alstom’s energy business.
The cuts, including 1,700 positions in Germany and 765 in France, are part of a broader push to trim overlapping expenses following one of GE’s largest-ever acquisitions, which closed in November. The company expects to generate $1.1 billion in savings this year and almost three times that amount by the end of the decade.
“This is a necessary step to increase the competitiveness of the former Alstom businesses and generate the synergies we have targeted,” Deirdre Latour, a GE spokeswoman, said by email. “We will work constructively with employee representatives throughout the process.”
GE is seeking to maximize returns from the $10.3 billion acquisition as Chief Executive Officer Jeffrey Immelt broadens the company’s reach in the energy markets. He is expanding divisions that make generators and oilfield equipment while selling off consumer-focused and finance operations. The Alstom deal tightened GE’s grip on the lucrative business of servicing and maintaining gas turbines, while adding joint ventures in renewable energy and electrical transmission businesses.
GE rose 0.7 percent to $28.85 at 10:12 a.m. in New York. The shares rose 23 percent last year compared with a 0.7 percent decline in the Standard & Poor’s 500 Index.
The job cuts represent about 14 percent of the 48,000 people that the company’s power division employs in Europe after the Alstom acquisition, a spokesman said. GE, based in Fairfield, Connecticut, promised to create 1,000 jobs net new jobs in France to win government support for the deal.
“We will absolutely ensure that General Electric sticks to its commitment to create 1,000 new jobs and will replace every job which it scraps in France with a new one,” French Economy Minister Emmanuel Macron told reporters in Paris.
Layoffs were expected as GE, already the world’s largest maker of gas turbines, integrated Alstom’s sprawling operations, Nicholas Heymann, a William Blair & Co. analyst, said in an interview.
“They’re adjusting the cost structure initially and then over time they’re going to build the business because they’re winning orders. Then they’re going to grow the workforce,” said Heymann, who rates GE outperform. “GE’s confidence in its ability to achieve the $3 billion of synergies over the first five years is higher than ever.”
GE said last month that it won a $1 billion contract for gas turbines and servicing on a new power plant in Saudi Arabia. The agreement followed recent electricity-generation deals in the U.S., South Korea and Pakistan.
The contracts come amid waning demand for gas and steam turbines in Alstom’s home market of Europe. Germany’s shift to renewable energy and away from coal and gas plants sapped demand for new generators, which can cost tens of millions of euros, in Europe’s largest economy.
Access to Alstom’s installed base, rather than its manufacturing capacity, may have been the primary motivation for GE’s acquisition of the Alstom assets, analysts have said. The contract to maintain a single gas turbine can generate as much as 30 million euros in revenue over a decade.
GE plans to expand its servicing capabilities to include repair and maintenance of competitors’ turbines, too — a move that takes direct aim at Siemens and other rivals. GE detailed the effort, including talks that could lead to contracts in the next few months, at an investor meeting in December.
The planned job cuts come on top of reductions elsewhere in the energy industry, which is grappling with a prolonged slump in the price of oil. BP said Tuesday that it would eliminate 4,000 jobs in crude production. The oil industry has reduced employment by about 250,000 in the past 18 months.