General Electric Co, the US based Company has announced that it was axing 12,000 jobs at the global power business as the struggling industrial conglomerate responds to the falling demand for fossil fuel power plants.

It announced the cuts in order to save USD 1 billion in 2018 and it does expect the current difficulties in the sector to continue. The traditional power markets which include coal and gas have softened for the company. The rumours of the job cuts were also confirmed by labour union sources in Germany and Switzerland which are among those badly hit.

Russel Stokes, head of GE Power mentioned that the decision was painful but necessary for the company to respond to the disruption in the power market which is already driving lower volumes in products and services. He mentioned that power will remain a work in progress in 2018 and further market challenges are expected to continue but this plan will help them prepare the company for 2019 and beyond.

A third of the company’s workforce in Switzerland faced layoffs while about 16 percent of the staff in Germany is also likely to be axed with this move. There was a dramatic drop in the demand for new thermal power plants in all rich countries. The traditional utility customers have reduced their investments due to the deterioration of the market and the uncertainty about future climate policy measures.

GE mentioned that there are no new power station projects in Germany in the recent years and the increasing Asian competition has also increased price pressures. General Electric CEO John Flannery outlined plans to reduce the manufacturing footprint of the power business of the company. This was in response to a fall in the demand for fossil fuel power equipment. GE has not yet specified on how many jobs it would cut and where.

The company’s rival Siemens is also cutting about 6,900 jobs which is close to 2 percent of its global workforce in the gas and power division, which has been hit by the high growth of renewables.