NACD - National Association of Corporate Directors

General Electric Cuts Dividend by Half and Slashes Profit Goals

General Electric Co.'s new CEO John Flannery on Monday outlined a restructuring plan that will streamline the industrial giant's operations and slash its annual dividend by $4 billion, reports the Wall Street Journal (Nov. 14, Gryta). At the same time, he cautioned investors that it will likely take years to fix some of the company's businesses and for profits to start to improve. Flannery lowered earnings targets for next year and warned that conditions will likely be difficult even in 2019, particularly in the 125-year-old company's largest unit, GE Power. "He laid out a future for three core markets -- power, aviation and health care -- and said the company would look to shed smaller divisions such as transportation and lighting," adds the Journal. He referred to 2018 as a "resent year" in which GE would be made into "a smaller business, a simpler business." Monday's presentation came after a strategic review Flannery had ordered when he took the reins on Aug. 1. The moves stop short of a break-up or radical restructuring of the company that some analysts had urged.

CNBC News (Nov. 13, Cox) states that GE also announced it was reducing the number of seats on its board of directors and will be cutting 25 percent of staff from its Boston home office. "Investors recoiled at the news about the dividend and restructuring," notes CNBC, "sending shares down 7.2 percent Monday in heavy trading." The selling pressure gained steam as the trading day went on with GE's stock down as much as 8.5 percent at one point. It ranked as the stock's worst single-day decline since April 2009 when GE was still caught in the throes of the recession.

The New York