General Electric’s stock lost an eighth of its value in the first two trading days this week, after the company announced its turnaround plan and dividend cut.
The plunge erased $22.5 billion in value for investors, but a much smaller figure — $1 billion — may have a larger or more lasting impact on the Capital Region: That’s how much Schenectady-based GE Power must cut its costs as part of the turnaround plan.
The company likely hasn’t decided what facilities and workforces will be reduced as part of that effort, or how deeply they will be cut, leaving people to wonder what will happen on the GE campus at the foot of Erie Boulevard.
It’s a busy place these days, with a significant backlog of work in its main product line, steam turbines and generators.
GE Power has made a few small cuts in the Schenectady workforce over the last year, though not in the hourly employees doing the physical work. The only other publicly disclosed steps toward $1 billion in cost reductions — throughout GE Power, not just in Schenectady — have been limitations on travel and off-site meetings; scrutiny of contracted services and reductions in number of contractors; delays in salary increases; and discretionary spending reductions.
A day after the announcement of $1 billion in cost cuts at GE Power, area leaders noted how important GE is to Schenectady and the Capital Region.
Mark Eagan, CEO of the Capital Region Chamber, said the company is valuable for many reasons.
“GE has a tremendous impact on the region,” he said. “Directly in the communities where they have their presence, what they do with jobs, payroll, then what they do with their taxes.”
Beyond the sheer number of jobs and the salaries they carry, there is value in the type of people who tend to hold those jobs, he said.
“They hire a lot of bright, engaged people who become involved in the community,” Eagan said.
Cutbacks in 2018 would be painful, just as were all the rounds of cutbacks in the second half of the 1900s as GE slashed its Schenectady workforce by tens of thousands of people, he said.
But given today’s tight labor market and high demand for skilled workers in the Capital Region, Eagan said, GE employees who lost their jobs might well find new employment without having to relocate out of this area.
Like Eagan, Glenville Supervisor Chris Koetzle said GE Power is no longer just a Schenectady presence -- its impact is felt well beyond the city and its employees live throughout the region. His own town, across the Mohawk River from the GE campus, is a prime example.
“Glenville was built by the GE engineer in the ’60s, ’70s ’80s,” he said.
Of the $1 billion in cuts, he said: “It’s a huge concern for the entire county. Here we go again, we’re going to have to figure out how to recover.”
Schenectady City Council member Vince Riggi understands the need for GE to cut costs, but also is familiar with the impact on his city.
“I’m old enough to remember when they employed 35,000 people,” he said. “Through the years, GE downsizing in general has had a huge impact. We had industry here. It was a shop town and we don’t have the shop anymore.”
A City Council colleague, Leesa Perazzo, said it’s in the direct interest of the city, county and region for the company to do what it must to get back on track.
“More worrisome would be if GE wasn’t doing what it needed to do to be a financially sound business,” she said.
“Certainly my concern would be for the citizens of the city and the county. I hope that it has a minimal impact,” Perazzo said, adding that it is not certain yet that there will even be any local cuts.
Schenectady County Metroplex Development Authority Chairman Ray Gillen, a leader of local economic development efforts, also said it's too soon to assume there will be a major local impact from GE Power’s billion-dollar streamlining.
GE Power has a presence in more than 100 countries, and any of those facilities might face cuts rather than its Schenectady campus, which has seen significant infrastructure upgrades in recent years.
“It’s a big operation,” he said.
In the wake of Monday’s investor update, in which GE CEO John Flannery shared his turnaround plan, Gillen had an optimistic take on what he’d heard.
“Power is one of three core businesses that the company is focused on moving forward,” he said in a statement. “While GE Power is facing a challenging global environment, [Monday’s] presentation reaffirmed GE’s commitment to being a world leader in the power business, building on the fact that 30 percent of the world’s electricity supply is produced by turbines and generators built by the company.”