General Electric

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GE shook up its C-suite.

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GE (-3.94%) named co-founder of Trian Fund Ed Garden to its board, but this time…no proxy vote was needed. 

Here’s what you might’ve missed: GE named John Flannery as its new CEO to replace company vet Jeff Immelt, who abruptly removed himself from the board. Then, on Friday, the shake-up continued when Flannery sent three top execs packing. 

GE shares are down 20% this year as costs continued to spiral out-of-control. But under Flannery, GE seems committed to slimming down, pledging to cut $1 billion in annual expenses. Just last month, it sold its industrial-solutions business to ABB for $2.6 billion. And two years ago, it pitched a good chunk of its finance arm, GE Capital (the equivalent of the U.S.’ seventh largest bank at the time), to Wells Fargo. 

Trian’s $2.5 billion investment in GE (1% stake) hasn’t come with the public squabble of its position in P&G. The board sees eye-to-eye with Trian (for the most part), and together they’ll work to trim the corporate fat…one overly priced jet at a time.

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UPDATE:

GE's Disappearing Dividend

GE’s (-7.17%) slimming down just in time for Thanksgiving, as CEO John Flannery announced the industrial giant will halve its dividend from 24¢ a share to 12¢. The $4 billion saved is part and parcel of a broader strategy to cut costs and focus on three core businesses: aviation, power, and health care. 

It’s a historic move

But for all the wrong reasons. GE already holds the gold medal for largest dividend cut ever ($8.9 billion in 2009). Its only other dividend cut? During the Great Depression...we’ll let you connect the dots there. Not a great sign when you’re running out of money and the economy isn’t experiencing a once-in-a-generation financial crisis. 

Just how desperate is GE right now? Well, it’s one of only ten companies in the S&P to decrease its payout to shareholders this year, while 310 have boosteddividends. And (GE investors: now’s the time to stop reading) as the S&P surged 16% YTD, investors made like Warren Buffett, driving GE’s stock 40% lower. It’s the Dow’s worst performer by a country mile.

Desperate times call for desperate measures

Flannery laid out a plan to transform GE from a “John of all trades” to a master of, well...some. These changes won’t happen overnight, but the long-term plan calls for: 

• Reducing a significant portion (possibly a third) of the company’s 300,000-person workforce.
• Shrinking the size of the board from 18 to 12.
• Selling $20 billion worth of assets, including a 63% stake in Baker Hughes, a $40 billion company satisfying all your oil drilling needs.
• Offloading its transportation and lighting businesses (the latter established by a guy named Thomas Edison).

Yesterday wasn’t the proudest moment for the 125-year-old American icon. But sometimes you just gotta rip off the Band-Aid.

Source

[Money & Finance]

General Electric (+7.76%) will cut its stake in Baker Hughes to a slight majority position, accelerating a plan to get the conglomerate some much-needed cash.