7,000 layoffs planned at GE Capital

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Posted 7:47AM on Tuesday, April 16, 2002

STAMFORD, Conn. - General Electric Co. said Monday it plans to eliminate 7,000 jobs this year at GE Capital in an effort to cut costs by $1 billion at the financial services division. James Parke, chief financial officer of GE Capital, discussed the plan in a conference call with analysts and investors, company spokesman David Frail said. The cuts represent slightly more than 2 percent of GE's work force of 310,000. "That's not a big surprise to us at all," said Nicholas Heymann, an analyst with Prudential Securities Inc. in New York. "It's certainly in line with expectations." Heymann said additional layoffs are likely on the industrial side. Frail said the cuts were not related to recent criticism of the company's finances or its first-quarter earnings report last week. GE Capital has previously cut its work force by 19,000 since the second half of 2000, he said. "This is a part of the productivity initiatives that GE Capital does on a regular basis," Frail said. GE Capital has a target of cutting administrative and operating expenses by $1 billion this year, Frail said. One of the key initiatives involves digitization, or moving operations onto the Internet to allow fewer people to achieve higher volumes. GE earned $2.5 billion, or 25 cents per share, in the January-March period, down from profits of $2.57 billion, or 26 cents per share, in the same quarter of 2001. It was a rare drop in profits for the blue-chip company. GE's profits matched the consensus forecast of analysts surveyed by Thomson Financial/First Call. But its flat revenue was below expectations and raised concerns about maintaining strong profits. GE Capital represents about 40 percent of the company's profits. Critics, including a leading bond trader, have questioned the source of GE's profits and its proportion of short-term debt. GE has stepped up its disclosures in response to the concerns and repeatedly reiterated its earnings forecasts. Other GE businesses include the NBC television network, aircraft engines, medical equipment and appliances. Shares of General Electric fell $1.70, or 5 percent, to $31.85 Monday on the New York Stock Exchange.