General Electric warns of continued difficulties for power division into 2018

General Electric’s management has warned that its beleaguered GE Power division will continue to encounter difficulties in the coming year, as the impact of the clean energy revolution persists.

While the company is enjoying success in its other two core units, healthcare and aviation, the erosion of its power unit continues to hurt.

“We said ’17 issues would carry over into ’18 in power, but it’s still a good franchise in power and we’re going to make the most out of that,” GE Chief Executive John Flannery said on a conference call Wednesday.
John Flannery of GE
The company’s traditional strength has been its gas turbine business, but that technology’s influence has waned, with more and more renewables being integrated into the energy system.

In 2018, GE is bracing for its worst year of gas turbine installations in about 15 years. The company is restructuring to prepare for orders that could be as low as 30 GW. In 2017, GE anticipates final orders of gas turbines will come in at less than 35 GW.

Profit in the power segment was down 88 percent in the final quarter of 2017, driven by tough market conditions, business execution mistakes and other charges, executives said.

GE equipment still produces about a third of the world’s electric power, Flannery noted, and the company holds 50 percent market share in advanced power technology.

Flannery added that the company will focus on four things going forward: adjusting the size of GE Power’s manufacturing footprint, improving cash and project execution, wringing more value out of its installed base of equipment, and improving management and processes.

GE Power announced 12,000 layoffs in December and has scaled back 15 manufacturing sites.

Russell Stokes, president and CEO of GE Power, says his unit has recently increased its ability to monitor outages that its equipment customers experience, increasing visibility from less than 30 percent of its installed base to nearly 80 percent. Servicing that equipment more efficiently represents a $2bn opportunity, he said Wednesday.

GE also has presence in the renewable energy area, but the outlook there is challenging too. While GE is shipping more megawatts worth of wind turbines, it faces pressure to lower prices.

The company expects profits to be down “significantly” in the first quarter of 2018 as it ships fewer wind turbines in the United States and continues to face price pressure, Chief Financial Officer Jamie Miller said Wednesday.

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