Photographer: Akos Stiller/Bloomberg

Clock Ticks for French Workers as GE Confronts Bloated Legacy

  • CEO Flannery holds fire on job cuts in France due to pledges
  • Amid parliamentary probe, unions say posts will eventually go

French workers were spared in General Electric Co.’s decision to axe thousands of jobs, but they won’t be protected for long.

The beleaguered U.S. industrial company is seeking to trim its bloated power division just two years after acquiring French rival Alstom SA’s turbine-making operations. Yet cutting jobs in France wasn’t part of GE’s plan unveiled last month to eliminate 12,000 positions worldwide.

Instead, French workers were shielded by guarantees offered by former Chief Executive Officer Jeffrey Immelt to clinch the $10 billion takeover. As he sought crucial French government backing for the deal, Immelt pledged to not only maintain existing employment levels, but add 1,000 net jobs by the end of 2018.

Now, the Alstom bet is looking increasingly ill-timed. The outlook for power activity has soured and GE’s new CEO, John Flannery, is fighting to reverse a deep slump in shares by cutting $1 billion of costs at the unit. Under pressure from investors, he’s narrowing the Boston-based company’s focus and selling assets. French labor groups say the moves have made French job cuts inevitable, since GE’s pledge only lasts through the end of this year.

“It’s going to hurt” starting in 2019, Helene Gonon, the CFE-CGC union representative at a GE site in Belfort, said by phone. "The life is slowly being sucked out of our plants."

Slashing Workforce

GE is cutting back after swallowing Alstom's energy business in 2015

Source: Company fillings

A labor cull in France would further tarnish GE’s reputation, which has suffered during an ongoing parliamentary inquiry into the fallout from the Alstom deal. The probe has triggered a war of words between opposition lawmakers and the government about whether GE is living up to its promises on jobs. It has also focused attention on the tie up with Alstom that has since proved a drag on GE, which lost about $128 billion in market capitalization in 2017.

A spokesman for GE said the company intends to continue to grow its activities in France.

The assets GE acquired from Alstom -- which included power and gas operations as well as three joint ventures in hydropower, wind and nuclear turbines -- have "clearly performed below our expectations," Flannery has said.

At a time when the market was already slowing, the purchase pushed the workforce at GE’s power division to 65,000 globally, and up 50 percent in France to about 15,000. Immelt fought hard to get the deal, beating back rival Siemens AG. The German company in November pushed ahead with its own job cuts at its power business, saying global annual demand for large power and gas turbines is roughly a quarter of manufacturing capacity.

Lawmakers Probe

GE has made former Alstom sites and fossil fuel-related operations the focal point of its plan to cut 4,500 European power division jobs. Unions estimate 1,050 will be in Germany, 671 in England, 300 in Poland and 1,411 in Switzerland. About 60 percent of GE’s French staff work in businesses related to fossil fuels, according to the company.

French President Emmanual Macron pushed through a landmark reform of the notoriously strict French labor code in September, making it easier for companies to fire workers and limiting payouts for wrongful dismissals. A second wave of changes is expected later this year to overhaul the unemployment insurance system.

“Nobody believes that France will be spared,” said Olivier Marleix, a French lawmaker who’s part of a parliamentary commission investigating the Alstom deal. The transaction was engineered by former Economy Minister Arnaud Montebourg, and signed by his successor, Macron, before he became president.

The commission is examining GE’s French operations in detail, looking for evidence of the promised job creation.

“Our target was, and remains, to position France as a global leader in energy,” Jerome Pecresse, the head of GE renewables, told the commission. “Traditional energy markets, gas and coal, which represented most of Alstom’s business, are losing speed.” Pecresse used to lead Alstom’s renewable-energy business.

Fines

For each position it fails to create, the company could be fined 50,000 euros, or a total of as much as 50 million euros ($60 million). Macron’s Economy Minister Bruno Le Maire has said the company has so far complied with its commitments by creating 358 jobs since November 2015 net of retirements and planned departures.

These include 105 of the 250 people it promised to hire for software design in Paris, and 194 for regional accounting, finance and management in Belfort. GE has also said it plans to create 550 jobs by next year at a wind-turbine blades plant in Cherbourg. Unions and politicians say these shouldn’t be included in the count, since the Cherbourg plant was owned by Danish turbine maker LM Wind, purchased by GE, and is therefore unrelated to Alstom operations. In any case, this would leave GE short of the 1,000 promised.

Gonon of the CFE-CGC union and other employees said the power business has been declining for months, and the company hasn’t kept a promise to install 3-D printers at a gas-turbine plant in Belfort to diversify industrial activities. A company spokesman said the investment is on hold and that the company invested 71 million euros in the site last year.

GE is also planning to cut 345 jobs at a hydro-power site in Grenoble, almost half of the workforce on the site, which is one of three jointly-owned ventures with Alstom. The French company, focused on rail transport since selling the turbine operations to GE, plans to exercise an option in September to sell out of two of the ventures. The fate of the third, a nuclear business, is uncertain.

— With assistance by Rick Clough

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