GE Pension Benefits Freeze May Cut Deficit Up to $8 Billion
General Electric Co. said it would freeze pension plan benefits for about 20,000 U.S. employees as it takes steps to slash its pension deficit and improve its financial position.
The industrial giant aims to cut its pension shortfall by US$5 billion to US$8 billion, it said in a statement Monday. GE shares rose about 2 per cent in pre-market trading in the U.S. The company had 97,000 U.S. employees at the end of 2018, or about a third of its worldwide workforce.
In other measures, the company will pre-fund US$4 billion to US$5 billion of its estimated requirements for 2021 and 2022 under the Employee Retirement Income Security Act, and offer a lump-sum payment to eligible former employees who haven’t started receiving their monthly pension payments.
GE’s stock has slumped since Larry Culp took the reins to become chief executive officer last year, underscoring the magnitude of the challenge he took on when he agreed to steer the company through one of the worst slumps in its history. The Boston-based maker of jet engines, medical scanners and gas turbines has struggled with a deep decline in its power-equipment business, as well as cash flow concerns, persistent insurance liabilities and debilitating debt.
The shares climbed as much as 2.6 per cent to US$8.79 in early trading.
“Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception,” GE’s chief human resources officer, Kevin Cox, said in the statement.