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GE announces deep cuts at Alstom

January 13, 2016

Just two months after winning a hotly-contested bid for French engineering company Alstom's energy operations, US industrial giant General Electric has announced plans to cut close to a fifth of the workers.

View of the General Electric site in Belfort, France.
Image: picture-alliance/dpa

Wednesday's move comes as GE seeks to integrate the newly acquired power business, while at the same time cutting some $3 billion (2.75 billion euros) in annual operation costs by 2020 - a promise it has made to investors as part of the purchase.

"The restructuring plan will touch several European countries and impact potentially 6,500 jobs out of 35,000," said a GE spokesman.

The overhaul was also likely to affect operations in other non-European countries, he added, as the energy industry continues to be weighed down by a painful price slump. However, GE did not go as far as to confirm reports by French newspaper L'Est Républicain that as many as 10,000 jobs were at risk.

France fuming

For now, the German and Swiss divisions are set to be hit the hardest, incurring cuts of 1,700 and 1,200 jobs respectively. But France could prove to be the fiercest battlefield for GE. Although the company expects to eliminate just 765 positions there, the move is seen as a slap in the face for both the French government and country's powerful unions.

GE paid 9.7 billion euros ($10.5 billion) for Alstom's power and grid businesses in November. But not before making a slew of promises to the government in Paris, which had to sign off on the deal.

One of those pledges was to create 1,000 high-skilled jobs in the country. This was meant to calm lawmakers concerned about additional job losses at the hand of a foreign owner at a time when the country was suffering from a chronic unemployment rate of 10 percent.

Laurent Santoire of the CGT union accused GE of breaking its promise, saying the company had done nothing but announce job cuts since the takeover. "Where is the investment plan?," he fumed.

Walking a tightrope

But more than France's notorious unions, GE must take pains to stay on the good side of the government, which also secured a 20-percent stake in Alstom as part of the 2014 sell-off of the company. The move strengthens Paris' control over Alstom, which is not only one of France's major employers, but also a key player in the country's transportation sector.

Government spokesman Stephane Le Foll said the state would "monitor" the situation to make sure the US owners kept their job creation promise. "The French government is accountable...for the commitment made by General Electric," he said following GE's announcement.

Trying to calm the waters, GE repeated its pledge on Wednesday, saying most of the lost jobs would be replaced with new ones in other sectors of the French operations. The company also said, the short-term cuts would have positive long-lasting, effects: "Over the long term, we remain convinced that the marriage between GE and Alstom will make us stronger to confront this market."

pad/hch (AFP, AP, Reuters)