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French Government Fined GE $57 Million for Not Meeting Job Target

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French government fined GE

The French government has fined General Electric (GE) 50 million euros (or $57 million) for failing to keep the job creation promise the company made during the acquisition of Alstom Power Systems. At the time of the Alstom buyout, the industrial conglomerate had committed to the French government that it will maintain jobs for at least three years and add 1,000 new jobs by the end of 2018. Last year, the government had threatened GE it would impose fines if it failed to keep its promise.

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The latest imposition of fines came two weeks after Reuters reported on January 23 that GE is planning to cut 468 jobs in its power division in France. Citing people familiar with the development, Reuters further revealed that the industrial conglomerate is already in discussion with its staff in France under a “collective mutually agreed termination” deal, a measure introduced in September 2017 to safeguard the rights of employees. GE has a total workforce of 16,000 employees in France. 6,000 of these employees are in its power division.

According to the news agency’s report, the majority of job cuts would be from Alstom. The company is likely to send a termination letter to about 229 personnel including some senior staff nearing retirement in Alstom. Moreover, about 149 personnel may lose jobs in the GE Energy Power Conversion France unit, and another 90 employees from GE Grid business unit may lose jobs.

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GE’s struggling power business

Once GE’s main growth engine, the power business unit is struggling to cope with changing industry dynamics. The segment has been underperforming for the past several quarters as soaring demand for energy efficiency and renewable energy has hampered the demand for fossil-fuel-based power plants. The GE Power division’s performance depends on the coal and gas turbine market.

In the last few years, companies like Vistra Energy (VST) and Dominion Energy (D) have shifted their focus to renewable sources and have lowered their dependence on fossil-fuel-based power plants.

Therefore, GE CEO Larry Culp has undertaken several initiatives to revive the power business including a management reshuffle and splitting the division into two different business units. However, the efforts are still at a very nascent stage, and there is still much to do to revamp the business unit.

The Industrial Select Sector SPDR ETF (XLI) has allocated ~3.4% of its holdings to GE stock. The ETF has also invested ~5% of its funds in Honeywell (HON).

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