General Electric announced an aggressive corporate restructuring on Monday. The company plans to eliminate 25 percent of staff from the home office. G.E. is currently the country’s largest manufacturing company and had about 300,000 employees worldwide at the end of last year. Employee bonuses also will be restructured into a program that conforms to “market norms,” according to the company’s statement.
The company said it was cutting the number of seats on its board. The board of directors will be reduced from 18 to 12, and directors will have 15-year term limits. Three of the dozen will be new directors.
The company also announced that it was reducing its dividend. The dividend allocation will be $4.2 billion for 2018. The company also set a $3 billion share buyback priority.
CEO John Flannery called the halving of the quarterly dividend to 12 cents a share “extremely painful.” The dividend reduction is the largest cut by an S&P 500-listed company during a nonfinancial crisis year. This is only the second time the company has cut its dividend since the Great Depression.
Investors reacted negatively to the news about the dividend and restructuring, sending shares down as much as 8.5 percent Monday. It was the stock’s worst single-day decline since April 2009. G.E. shares had already dropped by 35 percent this year through Friday.
G.E. is trying to restructure its way back to stronger growth. The company is looking to divest itself of more than $20 billion of assets and simplify its portfolio over the next two years. Flannery had previously given broad outlines of his strategy. The new statement detailed a shortlist of businesses that would be up for sale, like lighting and the company’s railroad-equipment unit.
Flannery said that the restructuring is “the opportunity, really, of a lifetime to reinvent an iconic company.” Flannery became chief executive in August, succeeding Jeffrey R. Immelt, who led G.E. for 16 years. G.E. sold off its media business, NBC Universal, and its consumer appliance business during Immelt’s tenure.
The restructured company will have a renewed focus on health care, aviation and energy. The goal is to make G.E. “simpler and easier to operate,” Mr. Flannery said. The company is predicting adjusted earnings for the year of $1 to $1.07 a share.