Barbara Howard: What is going on at General Electric? The Boston-based company seems to be struggling — its stock on a long downward trend, and now an announcement from G.E.'s CEO that the company is reducing the quarterly dividend to its shareholders, and cutting some jobs. This following news earlier this year that G.E. is delaying completion of construction on its new world headquarters in Boston. With us on the line to explain what is happening with G.E. and what it means for Massachusetts is Jon Chesto. He covers business for The Boston Globe. He is at G.E.’s investor meeting in New York City. Thanks for joining us, Jon.
Chesto: Sure. Thanks for having me.
Howard: Well, first let's look at the local impact here in Boston. Much was made of the move of the corporate headquarters from Connecticut to Boston. What's the status of that?
Chesto: They are delaying the completion of the headquarters by two years, but they are still sticking with that plan. It's a $200 million project, and they say they're standing by it.
Howard: OK. Now there's also talk of spinning off at least the lighting division now. That dates back to Thomas Edison's time. What's with that?
Chesto: Well there's two things. There's G.E. lighting, which does have its roots in the days of Thomas Edison, and G.E. is selling that off. There's also a group called Current, which focuses on I guess what you'd call smart lighting and energy efficiency and energy management solutions. That business is two years old, and it's based in Boston. They've decided that that business is too small and not really core to the company's efforts. So they're selling that off or divesting it.
Howard: OK, so it's about 50 people in Boston working near South Station, right?
Chesto: Yeah, they're at the WeWork office near South Station.
Howard: And now they're focusing on some key industries. Where are they keeping their investments?
Chesto: Well G.E. has decided under John Flannery that it's going to focus on three main business lines: aviation — and in Lynn, of course, we have a very large aviation factory; healthcare — and we have a decent sized portion of that business in the MetroWest area — and also power and energy.
Howard: And we also have, of course, 250 people you've written about in the temporary headquarters on Farnsworth's Street, which opened last year when they decided to move from Connecticut to here. Any more idea about any additional layoffs in the Boston area or in Massachusetts?
Chesto: You know, they've reduced their corporate headcount by 25 percent, but that's a global number. In Boston, there's been very minimal reduction. You know, they’ve cut a few jobs. They've added a few jobs. It's staying stable around 250. They have a tax break plan with the city of Boston to get to 800 jobs in the next six, seven years. And in return, they get $25 million off their taxes over a 20 year period. They still have a lot of time to get to that 800 job threshold. I don't see a very large increase in other locations in Massachusetts. But I think you will see the Boston headquarters count grow over time, it might not happen as quickly as they originally planned, but I think the minimal amount of 800 — they're still sticking by that. So you know, you might see them add about 50 to 100 a year over the next eight to 10 years.
Howard: G.E.’s also reducing its quarterly dividend for shareholders. So how come we didn't see some of those moves under the former CEO Jeff Immelt, who preceded John Flannery?
Chesto: Well specifically with dividend, you know, this is not something the company does lightly. And what happened was with their power division, they had less cash coming in than they expected. That was probably the biggest culprit. They need more cash to come in to pay for such a generous dividend. And so they're just trying to right size it a bit, and by cutting it in half, that's going to save about $4 billion a year that they'd otherwise be sending to shareholders. If you're investing in G.E., that's a pretty big hit. You know, it goes from 96 cents a share per year to 48 cents a share per year, so that's extra income that you're not getting. And the stock’s down more than 30 percent this year and took another hit today. But the long term thinking, Flannery would say bet on us because we're more focused than ever before, we're more transparent from ever before, and we're positioned to grow. So I would be surprised to see the stocks fall much further. So I think you're going to see appreciation of the stock. I don't blame G.E. shareholders for being pretty upset, though. The stock has not done well for many years.
Howard: But you're in New York. You were listening to John Flannery, the new CEO, and you sound confident that he's going to make good on his promises to Boston?
Chesto: He says he's confident. I'm … you know, I think there's still a lot of speculation that maybe they scaled back their headquarters project. I guess I would say I wouldn't rule it out. They tell me to rule it out. You know, I also think you know I wouldn't be surprised if maybe we don't get the 800 that maybe we're at 600 or 700 jobs and they don't get the full tax break, but they have so much time to get to that 800 jobs, it's so far in the future that I think it's likely that they can get there.
Howard: OK. Time will tell. Thanks for joining us, Jon.
Chesto: Thanks for having me.
Howard: That's Jon Chesto. He covers business for The Boston Globe, and he's currently at General Electric's investor meeting in New York City.