November 14, 2017

GE to sell Transportation division

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GENERAL Electric (GE) CEO Mr John Flannery announced on November 13 that the US conglomerate will sell its Transportation business along with its Industrial Solutions and Lighting activities within the next two years as it pursues a more focused strategy.

Addressing an investor conference call, Flannery said GE will refocus its activities around its power, aviation and healthcare divisions, a move which prompted many investors to sell shares, reducing the value of the company by 8% as it fell to a five-year low. The company’s stock has fallen by 40% this year and it now has a market value of $US 168bn.

The new strategy is likely to lead to the closure of many of GE's plants around the world, while Flannery is cutting the number of seats on its board from 18 to 12. GE is also set to cut its overhead costs by $US 2bn next year, half of which will come from its troubled power unit.

“Today, GE announced that it will divest the Transportation business from its portfolio,” the company said in its official announcement. “The Company is in the early stages of this process and exploring a multitude of possibilities that may include, among several options, creative approaches used to transition GE’s Consumer Finance business into Synchrony Financial or models like the Baker Hughes and GE Oil & Gas merger.

“This move is in line with GE’s broader efforts to divest $US 20bn in assets over the next few years. The Transportation business remains committed to building on its strong culture of innovation, deep domain, world-class technology and digital solutions in a way that best positions the business for growth.”

GE says recent downturns in the North American locomotive market had been partly offset by international growth and a strong backlog in its services business. It had instituted base cost reductions and rigorous supply chain management as well as focus on capital investment to optimise working capital requirements. However, the company admits there are “continued market challenges in Q4” and that it would still be under pressure in 2018-19. GE expects Transportation revenues to fall by 15% and profits by 25% in 2018.

GE announced in July that it would transfer production of locomotives from its plant in Erie, Pennsylvania, to Fort Worth, Texas following a 10% drop in domestic orders. GE has produced locomotives at its plant in Lawrence Park since 1910.

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