Those GE cost cuts had to come from somewhere.

General Electric Co. said Thursday it’s cutting 12,000 jobs in its power unit as that business grapples with slumping demand for gas turbines. Faced with a cash crunch and earnings disappointments that can be traced in part back to the struggling power division, GE is targeting that business for half of the $2 billion in structural cost cuts it’s seeking in 2018. Company cars and corporate jet use have already been nixed under CEO John Flannery, but those were largely symbolic actions. Job cuts are where the real bottom line benefits are going to come from, and we’re now seeing the impact on GE’s rank and file.

Even in the context of a behemoth like GE, 12,000 jobs is a lot. It’s 18 percent of the company’s power workforce, and about 4 percent of its overall employee count. For context, these cuts alone suggest GE is headed for its lowest overall headcount since at least the year 2000, according to data compiled by Bloomberg. And while the sheer scale of this job cut announcement may make it the biggest we see out of GE over the coming months, it is likely not the last as Flannery undertakes a comprehensive review of every dollar the company spends.

GE is hardly the only company having trouble with gas turbines right now. Rival Siemens AG expects global power-plant turbine demand to drop to about 110 annually on average from 2018 to 2020, down from 249 in 2011. As such, it’s cutting about 6,100 jobs in its power and gas division. But GE’s Flannery has admitted the company exacerbated the tough market conditions with “some really poor execution.”

It’s been clear for a while now that the power markets weren’t doing well, and yet for the better part of the year, GE executives remained relatively sanguine about the business and the company’s ability to hit what are now in hindsight overly optimistic 2017 earnings and cash flow goals. It’s worth noting that while disappointing results at Siemens’ power business dragged down its 2017 adjusted EPS to the low end of its guidance, it still made the range targeted back in January. How did GE get this so wrong?

That question leads you directly back to Steve Bolze, who ran the division for 11 years before leaving abruptly earlier this year after he was passed over to succeed Jeff Immelt as CEO. I’ve wondered before at what point GE — or its investors — start looking at clawbacks or some other sort of retaliation toward the likes of Bolze. As the direness of the GE’s power business gets laid bare with the extent of these job cuts, the matter only becomes more pertinent.

There are also going to be further questions about the wisdom of the $10.6 billion purchase of Alstom SA’s energy assets in 2015. A person familiar with the matter told Bloomberg News the bulk of the job cuts will happen outside the U.S. That suggests at least some of these will involve Alstom personnel.

Flannery was one of the top architects of that deal as head of business development for GE. He’s admitted the Alstom purchase “in total, has been a disappointment,” but also defended the fundamental strategic appeal. That logic will be tested by the success of GE’s turnaround efforts. One of the bigger pushbacks to the Alstom deal was the inherent challenge in Europe of laying people off to achieve cost synergies or to cope with weak demand. Indeed, in this latest round of job cuts, positions in France won’t be affected because of commitments GE made to win government approval for the deal.

Today is another painful day for GE. There are more to come, unfortunately.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

To contact the author of this story: Brooke Sutherland in New York at [email protected]

To contact the editor responsible for this story: Beth Williams at [email protected]

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