New York:¬†General Electric Co.‚Äôs new boss is shrinking the company and slashing the dividend as he wrestles with one of the biggest slumps in the industrial behemoth‚Äôs 125-year history.
Chief executive officer (CEO) John Flannery is planning to focus on aviation, power, renewable-energy and healthcare equipment when he unveils his plan for GE at an investor meeting later on Monday, said a person familiar with the matter. He‚Äôs also preparing to exit some other businesses and chopping the quarterly payout in half‚ÄĒonly the second cut since the Great Depression.
The extraordinary steps underscore the severity of the challenges facing the new CEO, who is readying a dramatic overhaul three months after taking the reins from Jeffrey Immelt. GE, plagued by poor cash flow amid slumping markets in power generation and oil-field equipment, is by far the biggest loser on the Dow Jones Industrial Average this year.
Flannery already has made changes to top management, sought deep cost cuts and welcomed a representative of activist investor Trian Fund Management to GE‚Äôs board. In addition to jet engines, gas turbines and ultrasound machines, the company‚Äôs offerings include locomotives and an aircraft-leasing portfolio. Its lighting products trace their origins to GE‚Äôs formation by Thomas Edison.
The shares climbed 1.5% to $20.80 ahead of regular trading New York.
GE fell 35% this year through 10 November.
The quarterly payout will drop 50% to 12 cents a share, the Boston-based company said in a statement Monday, in a move that will save about $4 billion a year.
GE last reduced the dividend in 2009 as it struggled with fallout from the financial crisis.
‚ÄúWe understand the importance of this decision to our shareowners and we have not made it lightly,‚ÄĚ Flannery said in the statement.
‚ÄúWe are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation.‚ÄĚ
GE in October slashed its expectations for 2017 profit and cash flow as Flannery called the company‚Äôs performance ‚Äúcompletely unacceptable.‚ÄĚ
Investors have been bracing for a dividend cut as GE‚Äôs slide deepened in recent weeks. The stock has lost about $100 billion in market value this year even as broader indexes have advanced.
The dividend had been recovering from a dramatic 68 percent cut in 2009, after Immelt for weeks had said the payout was safe.
Immelt has called slashing the dividend ‚Äúthe worst day of my tenure as CEO.‚ÄĚ
Flannery‚Äôs plan to refocus the company was reported earlier by the¬†Wall Street Journal, which said he plans to sell the company‚Äôs majority stake in Baker Hughes, a provider of oil-field equipment and services. The sale process, which isn‚Äôt part of the $20 billion target for disposals that GE announced last month, hasn‚Äôt started, the¬†Journal¬†said.