The company intends to remain in the business of supplying power plants with equipment and services, an industry it dominates alongside German rival Siemens. But GE could exit the oil and gas industry, and its role in renewable energy remains somewhat uncertain.
Shares of GE closed about 7 percent lower on Monday.
The rise of solar and wind energy has created challenges for GE's power business, which is focused on selling and servicing the turbines and other equipment at the heart of natural gas- and coal-fired plants. GE and Siemens are selling fewer of these systems, raising questions about their ability to capitalize on lucrative service contracts.
"Our power business is a challenged business right now. We've got a lot of work to do," said GE CEO John Flannery during a conference call on Monday.
"It's a heavy lift to turn around, but it's a fundamental asset, strong franchise in an essential infrastructure business. We can improve that a lot in the next one to two years," he said.
Making matters worse, GE executives acknowledged a number of missteps in recent years. The company misread aspects of the power market, leaving it with large inventories of equipment.
"We have exacerbated the market situation with some really poor execution," Flannery said.
On Monday, Russell Stokes, the president and CEO of GE Power, said his unit would aim to cut about $1 billion in structural costs, fix operational problems and adjust the size of the business to meet the realities of the market. He also said GE is lowering its outlook for the amount of equipment it expects to sell next year.
Flannery also signaled that GE will consider selling off its majority share in Baker Hughes, a separately traded company formed by the merger of GE's oil and gas unit and oilfield services firm Baker Hughes.
GE Oil & Gas was primarily known as an equipment manufacturer, while Baker Hughes specializes in services like horizontal drilling and hydraulic fracturing. The company aims to better compete with giants like Halliburton and Schlumberger and to use GE's big data analytics capabilities to improve Baker Hughes' services.
While GE expects the company to increase revenue and profit in coming years, the conglomerate is trying to reduce its exposure to volatility and commodities, which tends to consume management's focus, Flannery said. Oilfield services have been under pressure throughout a three-year downturn in oil prices.
GE recently set up a new finance and capital allocations committee, and its first task will be evaluating the company's options to exit its Baker Hughes stake, Flannery said.
Flannery similarly flagged strengths and weaknesses in GE's renewable power business, which focuses on developing wind turbines.
There's strong growth in the wind industry, and GE Renewable Energy is pushing into the integration of wind turbines and battery storage, a major trend in the space, Flannery said.
However, intense price competition is putting pressure on margins, he noted. That makes it critical for GE to drive down costs and successfully integrate LM Wind Power, a Danish maker of rotor blades for wind towers that GE acquired this year.