General Electric Co.  (GE) said Thursday, Dec. 7, that it will axe more than 2,000 jobs in Europe as part of a worldwide reduction in its workforce that could reach 12,000 in an effort to cut costs by around $3.5 billion over the next two years.

GE has told employees in Germany that around 1,600 people will be laid off, along with around 1,200 in Switzerland. The global figure may hit 12,000, GE said, a figure that would equate to nearly a fifth of the GE Power workforce, amid what it called "challenges in the power market worldwide ... driven by overcapacity, lower utilization, fewer outages, an increase in steam plant retirements, and overall growth in renewables." 

"This decision was painful but necessary for GE Power to respond to the disruption in the power market, which is driving significantly lower volumes in products and services," said GE Power CEO Russell Stokes. "Power will remain a work in progress in 2018. We expect market challenges to continue, but this plan will position us for 2019 and beyond."

"At its core GE Power is a strong business," Stokes continued. "We generate more than 30% of the world's electricity and have equipped 90% of transmission utilities worldwide. Our backlog is $99 billion and we have a substantial global installed base. This plan will make us simpler and stronger so we can drive more value for our customers and investors."

GE shares traded flat early Thursday at $17.66. 

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The job cuts come amid perhaps the biggest challenge in the company's 100-plus year history, which were amplified by the slashing of its  dividend -- for the second time in a decade -- as new CEO John Flannery confronts the reality of less consistent cash flow after selling most of its lucrative lending business.

The Boston-based company, which last reduced the quarterly payout in 2009, will return 12 cents a year to shareholders instead of the 24 cents it paid in the three months through September, according to a statement prior to the investor meeting on Nov. 13, when CEO John Flannery detailed his revised strategy for the digital manufacturer.

The shift, expected when the company declares its dividend in December, may save GE about $4 billion a year and comes in tandem with a drastic cut in next year's earnings. Profit of $1 to $1.07 in 2018 is about half GE's earlier prediction of $2 a share, far less than the $2.33 that activist Trian Partners had once argued was possible and even lower than this year's forecast.

"We understand the importance of this decision to our shareowners and we have not made it lightly," said Flannery, who succeeded Jeffrey Immelt in the top job on Aug. 1 and became chairman in October, roughly three months ahead of schedule. "We are focused on driving total shareholder return and believe this is the right decision to align our dividend payout to cash flow."

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