GE jet-engine unit to cut 1,000

Air travel woes might lead to more job trims in 2003

October 10, 2002|By BLOOMBERG NEWS

EVENDALE, Ohio - General Electric Co.'s jet-engine unit will cut 1,000 jobs this year and might pare as many as 1,800 next year because commercial air travel is taking longer to recover than GE had expected.

The cuts at the world's biggest maker of aircraft engines will include salaried and hourly workers, and will be made through early retirements, voluntary layoffs and firings, spokesman Rick Kennedy said yesterday. GE Aircraft Engines has about 26,600 employees worldwide.

The commercial airline industry isn't likely to begin rebounding until 2005, David Calhoun, chief executive of GE Aircraft Engines, said during a Webcast to employees Tuesday, according to a transcript. Service revenue and commercial-engine deliveries are slightly lower than expected but "not significantly off what we forecast," Calhoun said.

GE's stock fell 5.8 percent, to its lowest price since November 1997, after Morgan Stanley Dean Witter analyst Scott Davis became the latest to cut his 2003 forecast for the company. Eight analysts have cut their 2003 forecasts for General Electric in the past month on concern about the aircraft market, declines in power-plant turbine shipments and the economy.

Last month, Chief Financial Officer Keith Sherin said improvement in GE's more economically sensitive businesses "seems to have stalled" and didn't rise as much in the third quarter as the company had forecast. Economic conditions aren't expected to improve this year or next.

The company, which had been forecasting declines in its power-plant turbine and jet-engine businesses, will report third-quarter results tomorrow and is expected to give a detailed forecast for next year in December.

The 2003 average earnings estimate of analysts surveyed by Thomson First Call is $1.75 a share, down from $1.80 a month ago. Morgan Stanley's Davis cut his estimate to $1.70 from $1.79.

GE Aircraft Engines provided $11.4 billion, or 9 percent, of General Electric's $126 billion in revenue last year. Its CFM56 engine, which it makes with Snecma of France, is the only engine used on the Boeing 737, the world's most used commercial aircraft.

If the commercial industry remains depressed, the additional job cuts might be needed, Calhoun said.

Last year, GE cut 4,000 jobs, 13 percent of the work force at the time, as airlines pared flights after the terrorist attacks of Sept. 11. The latest cuts were reported earlier by the Associated Press.

GE's shares dropped $1.35, or 5.8 percent, to $22 on the New York Stock Exchange yesterday. That is their lowest price since 1997. They have declined 45 percent this year.

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