General Electric's (GE's) long-term punt on the profitability of its oil and gas business is not paying off. The US giant will cut almost one fifth of its global workforce in that area as it tries to meet its own cost-cutting targets.
GE announced on Thursday it would cut 12,000 jobs in its power and energy business around the world, just under 20 percent of its current global workforce in that sector.
The company's German workforce will bear a considerable brunt of the job losses, with 1,600 jobs expected to go in the cities of Mannheim, Stuttgart, Berlin, Mönchengladbach and Kassel.
The conglomerate, which operates across multiple sectors, says the job losses are needed in order to reduce its structural costs by the previously announced target of $1 billion (€849 million) by 2018.
General Electric attributed the job losses and the need for cuts to "challenges in the power market worldwide," saying that traditional power markets, including gas and coal, have "softened."
"This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services," said Russell Stokes, president and CEO of General Electric's power division, known as GE Power.
"Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond."
'Not economically justifiable'
Demand for fossil fuel power plants has been falling for several years now, with uncertainty over future climate change policies driving the fall in developed countries in particular.
Rumors of significant job cuts were confirmed by labor unions in Switzerland and Germany, where General Electric staff have been particularly affected.
Up to a third of the company's Swiss workforce will lose their jobs, while the 1,600 jobs expected to go in Germany accounts for 16 percent of the country's General Electric workforce.
IG Metall, the largest union in Germany and Europe's largest industrial union, heavily criticized the decision to cut so many jobs, particularly in Germany.
"The GE Group's announcement that it intends to reduce thousands of jobs throughout Europe is neither strategically nor economically justifiable and serves the short-term profit maximization of shareholders," said Klaus Stein, an IG Metall leader in Mannheim.
It has been clear that General Electric has been struggling for some time. Its market capitalization has fallen dramatically in 2017, with the conglomerate's oil and gas business having shown particular vulnerability.
aos/uhe (Reuters, AP)