General Electric is making plans to significantly reduce corporate staff in an effort to cut spending and boost profits under its new chief executive, and the company already has halted hiring in certain technology positions, a person familiar with the situation told Reuters.
Continue Reading Below
New Chief Executive Officer John Flannery has told senior-level executives to prepare for cuts at headquarters and other areas of the company that do not produce revenue or profit.
"The cutting is going to start and it's going to be aggressive," said the source, who had direct knowledge of the discussions.
It was not known how many jobs would be eliminated.
GE declined to discuss details but noted that in March it announced plans to reduce overhead.
"We have a plan to take out $2 billion in cost by the end of 2018," GE spokeswoman Jennifer Erickson said. "We've said John is reviewing all aspects of the company. He will present to investors in November."
Flannery is not waiting until November to begin making reductions, the source said.
Analysts have said GE would need to cut spending by more than $2 billion because it is increasing spending in other areas, such as its digital business. GE also is changing financial targets and strategy for GE Digital and its Predix industrial internet system to boost sales.
GE's profit and cash flow under former CEO Jeff Immelt disappointed investors, and GE stock has fallen 23 percent this year.
GE's $2 billion cost-reduction target was set in March after the company's leaders talked with activist investor Nelson Peltz, whose Trian Fund Management owns about $2 billion in GE stock.
In cutting corporate overhead Flannery would limit the size of its new Boston headquarters, according to the source.
GE said earlier this month that it would delay construction of part of its headquarters to save money.
Staff reductions would affect people working in such areas as human resources, recruiting, corporate security, helicopter and jet operations, procurement, auditing and possibly finance, the source said.
Reductions also are expected in information technology, where a hiring freeze is in place, though they would not include people working on Predix and its applications or digital sales, the source said.
(Reporting by Alwyn Scott; Editing by Toni Reinhold)