General Electric’s (GE’s) power unit has said it will end manufacturing operations at its plant in Salem, Virginia, next year, with more than 260 workers losing their jobs, according to union officials. Officials noted that 42% of the affected workers are eligible for retirement.
The plan announced June 8 said the Salem plant, which opened in 1955, would continue as an engineering center staffed by some 200 employees. GE is among the largest employers in the Salem region, and the plant at one time had about 3,500 workers.
The company said the Salem manufacturing work would move to other GE locations or be handled by supplier partners. GE has struggled along with other turbine manufacturers over the past year as global demand for the units has fallen. CEO John Flannery in May told a Florida electrical products conference that the company is trying to stem the tide of business losses, but said he is “being deliberate” with moves to reorganize GE even as the company’s stock price has been hammered in the past year.
GE in December 2017 said it would cut 12,000 jobs in its power unit, resulting in a savings of $1 billion this year. Flannery, who took over the company from long-time CEO Jeffery Immelt in August of last year, in November 2017 outlined plans to reduce manufacturing in GE’s power business due to falling demand for new equipment. He said division cuts would include $3.5 billion in “structural costs,” including $1 billion in the power unit.
The company’s letter of intent to union officials Friday came from Salem Plant Manager David Ferrell. Vicky Hurley, president of the labor union at the facility, said more than 40 salaried workers would be let go, along with 221 hourly manufacturing personnel.
Salem Mayor Randy Foley in a statement said: “The GE plant and its workers have been integral parts of Salem’s fabric for more than 60 years. When the plant employed over 3,000 back in its heyday, it seemed like everyone you knew had a family member who was working there, and many of them were actively involved in the community and their respective neighborhoods. Sadly, industrial plants across the state and the country have been through tough times in recent years. I think we always knew this was a possibility, especially since GE has been reducing its workforce worldwide in past years.”
Revenue for GE’s Power division dropped 7% in the first quarter of 2018 compared to the year earlier. The company in March laid off 42 workers at the Salem plant, citing a decline in orders for the company’s power generation products. The Virginia plant designs and produces control systems and integrated circuit boards for gas and steam generators, pitch systems for wind turbine blade controls, starters for gas turbines, and down-tower assemblies for wind power conversion systems.
Ferrell in his letter to the union said if the group asks for it, GE—in accordance with its collective bargaining agreement—would engage in a 60-day decision bargaining period regarding the intended closure. If GE moves forward with its plan, the company said transfer of the manufacturing work would take place over the next two years.
The GE statement says:
“Based on the ongoing challenges in the power industry and a significant decline in orders at this facility, we have announced our intent to close our manufacturing facility in Salem, VA, and move the remaining work to other GE locations or to supplier partners. If requested by the local union, in accordance with the collective bargaining agreement, GE will engage in a 60-day decision bargaining period with the union regarding the intended closure.
“If GE makes a final decision to go forward with this transfer of work, GE would continue to have a presence in the Salem community, employing more than 200 professionals across our Power, Renewable Energy and Baker Hughes businesses.
“This action is difficult and does not reflect the performance, dedication, and hard work of our employees. If the site is closed, impacted employees, nearly half of whom are eligible for retirement, would be provided with a comprehensive severance package, including transition support to new employment.”
Salem City Manager Kevin Boggess said: “I am both surprised and saddened to learn that the GE plant is potentially closing at the end of the year. Right now, our thoughts are with the workers and families who could be displaced in the coming months. GE truly has been a Salem institution for decades, and we hope that many of these individuals can find new employment elsewhere in the valley. Financially, the impact on the city will not be nearly as significant as it would have been 20 or 30 years ago, because the plant’s production has been greatly reduced in recent years.”
GE in a letter to investors in February of this year outlined a three-part strategy to address the outlook for the power unit. Flannery at that time told investors “it will take us into 2019 to right-size our business” for the falling market for turbines.
The market has proved difficult for GE’s competitors as well. Siemens in November 2017 said it would cut 6,900 jobs as it consolidates its power divisions. Siemens and GE both fell behind Mitsubishi Hitachi Power Systems (MHPS) in the number of global orders for gas turbines in the first quarter of 2018.
MHPS has not been immune to staff reductions, cutting more than 300 jobs at a plant in Germany in early 2017, though Paul Browning—chief executive of MHPS North America—told Reuters earlier this year, “We did see a lot of this coming and didn’t make acquisitions or build up a lot of facilities, people, or inventory.”
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).