General Electric

GE shutters R&D centre in Shanghai as markets eagerly await CEO Flannery’s strategic review

The US engineering giant says the move will result in the loss of only a small number of jobs, but will increase investments in advanced manufacturing and robotics in China

PUBLISHED : Friday, 20 October, 2017, 10:13am
UPDATED : Friday, 20 October, 2017, 10:42am

The US conglomerate General Electric, as part of its cost-cutting efforts, is closing its R&D operations in Shanghai and transition it to an engineering centre.

The company told the South China Morning Post said it will strengthen localisation efforts and increase investments in advanced manufacturing and robotics in China, which is “an important and critical market for GE”.

The shutdown will affect “only a very small percentage” of its over 3,000-strong research and engineering team in China, it added.

Other research sites in Munich, Germany and Rio de Janeiro, Brazil will also be closed, leaving GE only two global research centres, one in Niskayuna, New York and the other in Bangalore, India.

“China is an important and critical market for GE,” the company said.

“While we will no longer continue corporate research in Shanghai, we are doubling down on localisation, advanced manufacturing, additive manufacturing, robotics, digital, and building stronger partnerships with Chinese customers as they go global.

“These are the right moves to position GE in China for longer-term success,”it said.

Previously, media reports said John Flannery, who took over as chief executive officer of GE on August 1 and became chairman on October 2, plans to unveil the results next month of a strategic review that includes thousands of job cuts and scaling back of the company’s global structure.

Flannery, who is under pressure to slash costs and end a stock decline this year, has already conducted some belt-tightening moves, including shutting down its corporate jet fleet for executives.

The retrenchment moves include shutting down several global research sites for GE, which spent more than US$5 billion on R&D last year, the Wall Street Journal said in a report.

When asked by the Post, GE did not comment on the strategic review, but said “the next chapter of GE Global Research’s transformation will require us to drive faster technical adoption, be more cost competitive and be closer to the scientific pulse of research within our industries”.

About 70 per cent of GE’s business comes from global markets, it said.

GE’s stock has declined 27 per cent this year, when US major benchmarks have repeatedly hit record highs. The company was scheduled to post third quarter earnings on Friday, with investors and analysts waiting for Flannery to unveil his plans following a comprehensive review of the company.

Earlier this year, GE said it plans to cut US$2 billion in costs by the end of 2018.