Bad news for workers at General Electric (GE). The company will be “freezing retirement benefits for 20,000 longtime employees” in order to cut billions from its pension deficit and debt pile, says Peter Wells in the Financial Times. In addition to ending the accumulation of extra benefits for members of its US final-salary scheme, GE will offer to buy out about 100,000 former employees who are members of the scheme but haven’t yet retired. This is CEO Larry Culp’s latest move in an ongoing effort to turn the group around.
Transferring value from employees to shareholders in this way is a “bit awkward”, but also necessary, says John Foley for Breakingviews. Shareholders have already “suffered” through dividend cuts and a share-price drop of 30% since Culp took over, so the idea that some employees will give up future benefits “isn’t so mean”. In any case, GE “isn’t alone” in changing pension rules, with the 100 biggest US companies also slashing their unfunded liabilities.
There will be no change for retirees, while employees “will get to keep the benefits they’ve already accrued”, says Bloomberg’s Brooke Sutherland. Still, this will feel like a “slap in the face” for those employees who’ve stuck it out through some of the company’s “darkest days”. Although GE needs to reduce its debt load, the fact that workers, “are still paying the price for the company’s mistakes” leaves a “bitter taste”, especially since former CEO Jeff Immelt will keep his $85m in pension benefits – despite his “ill-conceived” acquisitions and buybacks.