General Electric Co. slashed its dividend to just a penny a share and said it plans to reorganize its ailing power division as new Chief Executive Officer Larry Culp took his first major steps to save the beleaguered manufacturer. The shares rose.

GE cut its quarterly dividend from 12 cents a share -- only the third reduction since the Great Depression -- which will save GE about US$3.9 billion a year.

Key Insights

• The announcements mark Culp’s first moves to turn the company around. He has yet to address shareholders since the board’s surprise Oct. 1 decision to oust CEO John Flannery, making Tuesday’s pronouncements highly anticipated.
• For power, GE plans to create two units: a unified business combining GE’s gas product and services groups; and a second operation with the portfolio of GE Power’s other assets, including steam, grid solutions, nuclear and power conversion. GE Power has been a main source of the company’s troubles and reported a 33 percent decline in third-quarter sales.
• It’s not all bad for the beleaguered manufacturer. Sales climbed 12 percent in GE Aviation, which is boosting production on a new engine for narrow-body commercial jets.

Market Reaction

• The shares rose 1.3 per cent to US$11.30 in New York premarket trading. GE plunged 36 per cent this year through Monday as the Standard & Poor’s 500 Index slid just 1.2 per cent.
• Culp’s appointment sparked a mini-rally earlier this month, but that fizzled recently amid renewed questions about the power and finance businesses. The shares closed Monday below the US$11.29 closing price of Sept. 28, the last trading day before the CEO change.
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