(Adds details, background)
March 22 General Electric Co said it
expected to cut costs and boost operating profit in its
industrial unit and linked the bonuses of its senior management
to meeting these goals, as it bows to pressure from Nelson
Peltz's Trian Fund Management.
GE, considered a bellwether for the U.S. economy, has been
streamlining its operations over several quarters to become a
simpler industrial business instead of an unwieldy mix of
banking and manufacturing.
The company said on Wednesday it expected industrial
structural costs of $23.9 billion in 2017 and $22.9 billion in
2018. GE had reported costs of $24.9 billion in 2016.
Operating profit from the unit is expected to rise 10.5
percent to $17.2 billion in the current year.
GE said 2017 bonuses for Chief Executive Officer Jeff Immelt
and his direct reports at the senior vice president level and
above will be raised or lowered by 20 percent depending on
whether these targets are met.
For 2018, GE said it would review its performance goals to
further align incentives.
The company shed its designation as a non-bank systemically
important financial institution after divesting most of its GE
Capital business. The change is expected to free about $18
billion in capital, which GE had pledged to return to
shareholders through buybacks.
Peltz, through his hedge fund Trian, currently owns 66.8
million shares - less than a 1 percent stake - in GE.
Trian had disclosed an about $2.5 billion investment in the
company in October 2015, making it one of the top 10
shareholders at the time. (reut.rs/2msGn7S)
"Over the past month, Trian has intensified its dialogue
with senior management regarding new initiatives to help ensure
that GE can meet its financial commitments," Trian said in a
separate statement on Wednesday.
The hedge fund said it had invested in GE in 2015 because it
liked the company's industrial businesses and appreciated the
move to separate GE Capital, and believed that management would
meet its commitment to earn $2.00 per share in 2018.
(Reporting by Rachit Vats and Sayantani Ghosh in Bengaluru;
Editing by Saumyadeb Chakrabarty)