GE to freeze pensions of around 20,000 salaried US employees - GulfToday

GE to freeze pensions of around 20,000 salaried US employees


A facility of General Electric in Belfort, France. Agence France-Presse

General Electric Co (GE) would freeze pensions for about 20,000 salaried US employees and take other related moves to help the ailing conglomerate cut debt and reduce its retirement fund deficit by up to $8 billion.

Analysts said the move would largely offset the rise in GE’s pension obligations due to lower interest rates and was in line with other steps Chief Executive Officer Larry Culp has taken over the past year to raise cash and pare down $105.8 billion in debt. Culp has slashed GE’s quarterly dividend to a penny and has sold - or announced plans to sell - non-core businesses, slimming the once-sprawling company to focus just on power plants, jet engines and windmills, plus related equipment and services.

GE’s pension plans are among its biggest liabilities and were underfunded by about $27 billion at the end of 2018. US employees facing the pension freeze will be moved to a defined-contribution retirement plan, such as a 401(k) plan, in 2021.

The company has struggled to boost profits amid a slump in demand for its gas-fired turbines for power generation. It also faces potential costs of more than $1 billion in its jet engine unit from the grounding of Boeing Co’s 737 MAX airliner.

GE also is likely to set aside about $11 billion to cover liabilities for its long-term care insurance business. By freezing the US pensions, pre-paying about $4.5 billion in contributions due in 2021 and 2022 and offering lump sums to about 100,000 retirees, GE said it expects to cut pension underfunding by $5 billion to $8 billion.

William Blair & Co. analyst Nicholas Heymann said there was no immediate net reduction in GE’s pension liabilities given the 90 basis-point decline in long-term interest rates since the end of last year, which has caused its pension liabilities to creep up to about $34 billion from $27 billion toward the end of 2018.


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