GE Freezes Pension Benefits to Cut Deficit by Up to $8 Billion

• Move will cut net debt by as much as $6 billion, GE says
• Culp takes steps to address one of company’s thorniest issues
• GE rose 1.4% to $8.69 before regular trading in New York. The shares advanced 18% this year through Friday, matching the S&P 500 Index.

 

General Electric Co. took a bold step to cut the debt hampering Chief Executive Officer Larry Culp’s effort to turn around the struggling manufacturer, freezing pension benefits for about 20,000 employees in the U.S

The company also plans to pre-fund $4 billion to $5 billion of its estimated requirements for 2021 and 2022, according to a statement Monday. The moves will help trim the pension shortfall by $5 billion to $8 billion and reduce GE’s industrial net debt by as much as $6 billion

 

GE, which closed its pension plan to new entrants in 2012, will offer a lump-sum payment to eligible former employees who haven’t started receiving their monthly pension payments.

“Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception,” GE’s chief human resources officer, Kevin Cox, said in the statement.

About 700 employees will also have supplementary pension benefits frozen, GE said. The moves will take effect Jan. 1, 2021. GE had 283,000 employees worldwide at the end of last year, including about 97,000 in the U.S.