Industrial conglomerate General Electric (NYSE:GE) printed red ink in the open market on Thursday afternoon, with management announcing that it will lay off workers at its onshore wind turbine business, per an exclusive report from Reuters. The cuts represent part of a plan to restructure and resize the company. Although GE stock may appear promising to long-term investors, it struggled this year amid weak demand, rising costs and supply chain delays.
Reuters interviewed four sources familiar with the layoffs. They noted that the company notified employees in North America, Latin America, the Middle East and Africa about the cuts. As well, GE will likely pink slip onshore wind workers in Europe and the Asia-Pacific at a later date.
Overall, the insiders stated that the cuts will impact 20% of the U.S. onshore wind unit’s headcount. Nominally, this would equate to hundreds of workers. While GE confirmed to Reuters that the company is “streamlining” its onshore wind business, it did not mention workforce cuts.
“These are difficult decisions, which do not reflect on our employees’ dedication and hard work but are needed to ensure the business can compete and improve profitability over time,” a GE Renewables spokesperson told Reuters in an emailed statement.
Tough Times Ahead for GE Stock
To be fair, despite today’s soft performance, GE stock gained almost 6% in the trailing five days. Since hitting a bottom in mid-May of 2020, shares have yet to revisit this trough. Therefore, many contrarian investors that bought into the pandemic-fueled dips remain profitable. At the same time, circumstances will likely not be easy for General Electric moving forward.
For instance, the U.S. segment represents GE’s most profitable onshore wind market. However, Reuters notes that “policy uncertainty following the expiry of renewable electricity production tax credits last year has hit customer demand, leading to a fall in the unit’s revenue this year.”
Other headwinds moving against GE stock from the usual suspects. “Heightened competition, supply disruptions due to the COVID-19 pandemic and soaring metals prices exacerbated by the war in Ukraine have made it difficult for wind turbine makers to generate profits even as governments and companies are calling for more renewable energy in the face of climate change,” per Reuters.
One factor that could be a wildcard is the potential longer-term pivot to clean and renewable energy sources. According to the Yale School of the Environment, Russia’s initial invasion of Ukraine sparked European calls for fast-tracking renewable infrastructures. Should this sentiment be sustained, it could pan out positively for GE stock.
Nevertheless, the fluidity of the new normal presents major concerns. As well, competing energy sources such as nuclear power may weigh on the broader wind turbine industry. Therefore, GE stock features somewhat of a speculative profile at this juncture.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
