Schenectady

General Electric Co. CEO John Flannery says GE Power can stay, but it needs to slash its budget by $1 billion.

Flannery, who replaced Jeff Immelt as GE's leader over the summer, laid out his highly-anticipated vision for the company on Monday in a meeting with analysts that lasted nearly three hours.

As expected, Flannery said that GE would exit businesses such as lighting and locomotives while it focuses on core businesses such as aviation, health care and its power plant business, known as GE Power.

That's good news for downtown Schenectady, where GE has its power business headquarters and employs roughly 4,000 people.

It's also good for the additional 2,000 people that work for GE Global Research in Niskayuna. Flannery praised the Niskayuna lab in his remarks Thursday and just said that GE is looking to close some foreign labs, but Niskayuna will remain open.

Local officials praised Flannery's remarks, noting that he reaffirmed the importance of GE's local operations.

"GE's investor presentation today affirmed the important role played by GE's Global Research Center in Niskayuna and the fact that GE Power is an integral part of the company," Ray Gillen, chair of the Schenectady County Metroplex Development Authority said Monday. "Power is one of three core businesses that the company is focused on moving forward. While GE Power is facing a challenging global environment, today's presentation reaffirmed GE's commitment to being a world leader in the power business building on the fact that 30 percent of the world's electricity supply is produced by turbines and generators built by the company."

But the good news was also tempered by the news that Flannery wants to cut $1 billion in annual expenses from GE Power, a move that could spell job cuts in Schenectady, although the company has declined to provide any specific details on how the cost-cutting would be executed.

Flannery has not hidden his disappointment with GE Power, which posted disappointing third quarter results that dragged down GE's overall earnings during the period and continued years of disappointing performance by GE's stock.

"We have not performed well for our owners," Flannery said during the analyst meeting, held in New York City. "That is unacceptable."

Just a few hours before Flannery made his remarks, he also cut GE's dividend paid to stockholders in half, dropping it to 12 cents per share from 24 cents.

"We understand the importance of this decision to our shareowners and we have not made it lightly," Flannery said when he announced the dividend cut. "We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow generation."

During the third quarter, GE Power's revenue dropped 4 percent to $8.7 billion, and its operating profit was down 51 percent to $611 million as GE overall saw its profits drop 10 percent.

Flannery blamed the drop on poor execution and a buildup of excess inventory from overly optimistic sales projections.

As a result, GE Power CEO Russell Stokes is tasked with cutting $1 billion from GE Power's annual expenses.

Stokes, who is based in Atlanta, said some of the problems at GE Power had to do with GE's previous projections of capacity payments that power plants earn to have readily available electricity to send onto the grid. Because of that, fewer power plant owners are paying for upgrades to power plants that GE provides.

"The U.S. market is clearly softer than we (anticipated)," Stokes said.

Flannery's announcement on the dividend cut and his vision for GE's future rattled Wall Street and sent investors scrambling for the exits.

Shares of GE (GE:NYSE) fell $1.47, or 7.17 percent, to $19.02 a share, a five-year low for the company that has already been dogged by complaints about its sagging stock price.