General Electric announced it is going to freeze the pensions of 20,000 U.S. salaried employees, a measure designed to scale back its pension deficit as well as for trim debt. The move will cut GE’s pension deficit by as much as $8 billion and its net debt by as much as $6 billion.
As a part of the pension freeze, the industrial conglomerate mentioned it is going to freeze supplementary pension benefits for around 700 employees who became executives before 2011. Supplemental pension plans are usually designed for higher-ranking workers and offer benefits beyond the standard pension plan.
“Returning GE to a position of power has required us to make several difficult decisions, and at this time decision to freeze the pension isn’t any exception,” mentioned Kevin Cox, chief human resources officer at GE.
As a part of such efforts, the company said last month it would spend $5 billion to pay down debt. However, the attempt to reduce debt could additionally harm employee support at a time when CEO H. Lawrence Culp Jr. is trying to turn around the troubled conglomerate.
“The impact on employee engagement/morale of some of these pension measures is unlikely to be positive, however in a situation of ‘corporate battlefield surgery,’ this tends to be typical, if unfortunate casualty,” noted Barclay’s analyst Julian Mitchell in a Monday research note.
Culp, a turnaround specialist, was paid more than $15.3 million last year, or 345 times the 2018 median GE employee wage of around $43,500.