STATEMENT OF JOHN H. HOVIS,
United Electrical, Radio and
Machine Workers of America (UE)
On the opening of National Negotiations
with the General Electric Company
May 30, 2000
Three years ago, at the opening of national
negotiations between UE and General Electric, we took note of GE
Chairman Jack Welch’s description of the Company as "a $7.3
billion net income machine", following its then record profit
year of 1996.
The magnitude of GE’s burgeoning fortunes since
that time is nothing short of astounding, and has made 1996’s
results look small by comparison. Not only has the machine cranked
out another three years of double digit profit increases culminating
in last year’s $10.7 billion, but the Company now says that with
order rates running some 20% ahead of 1999 levels, GE has
"unusually strong momentum" for this year as well.
Moreover, GE continues to overwhelm any real or
perceived competition. The Company is now in the enviable position
of controlling and largely dictating the terms in many of the
markets it is in. Increasingly, GE simply buys its way into market
dominance. The Company’s $50 billion binge of acquisitions,
amounting to well over two per week over the past three years, is
testimony to the growing irrelevance of GE’s alleged competitors.
As Mr. Welch recently noted, "...we can’t
compare ourselves in any way to our traditional
competitors." Rather than facing the "brutal
competition" so often invoked by company negotiators, GE
realistically faces only the ghost of competition past.
In this context, it is small wonder that Mr. Welch
told his top managers earlier this year that it is a time for
"irrational exuberance", as he urged them to
"celebrate results". GE stockholders indeed have had
plenty to celebrate. Not only have they enjoyed twenty-four
consecutive years of dividend increases, but the zooming price of GE
shares was reflected in the recent unprecedented 3-for-1 stock
Mr. Welch certainly understated the case when he
conceded that the Company can afford a "fair and generous"
contract settlement. However, our members have a well founded
skepticism as to whether the company’s idea of generosity will
meet their expectations. After all, GE workers are the world’s
best and most productive. Last year alone they produced on average
over $31,000 apiece in net profits for the Company. They have earned
their just reward and then some.
Having been involved in national bargaining with
General Electric for more than 62 years, we in the UE are under no
illusions that GE is prepared to reward our members to a degree that
would remotely reflect their true contributions to the Company’s
financial success. But, while we doubt that we will ever have cause
to celebrate or to be exuberant in the manner of GE managers and
stockholders, we nevertheless believe that with hard work we can
negotiate an agreement that is acceptable to our GE membership.
Our members have sent us to these negotiations
equipped with proposals covering a variety of topics. And while it
will come as no surprise that we will emphasize such issues as
pensions, job and income security, and health insurance, it would be
a mistake for the Company to conclude that these are our only areas
of concern. To succeed we must negotiate a well balanced tentative
agreement for our members’ consideration, an agreement that
addresses a range of issues.
Certainly the issue of pensions is of great
importance. It provides perhaps the most glaring example of the
Company’s insatiable lust for wealth. In 1999 alone, the assets of
the gargantuan Pension Trust increased by over $7 billion to a total
of over $50 billion. The pension surplus increased by some 55%, to a
point where the Trust now contains about twice as much as is needed
to fund all present and future obligations.
We know of no other company that approaches this
level of overfunding. Yet, the very size and soundness of the Trust
has in some ways become its own liability to Plan participants. The
GE Pension Fund, which exists solely to benefit Plan participants,
has become a profit center used to attract shareholders and to
bolster GE’s stock price. Accounting rules have allowed the
Company to add $2.7 Billion in windfall pension "profits"
to its balance sheet in just the last three years. More ominously,
this provides the Company with a disincentive to use the surplus to
There is simply no justification for anything other
than very substantial increases in both the career and guaranteed
minimum formulas. A substantial career earnings update is due as
well. Moreover, continued employee contributions are not only
unnecessary, they ought to be an embarrassment to a company which
has contributed nothing to the Fund since 1987 and likely never will
The UE will also propose a lowering of the early
retirement age and modifications of the Plan to protect our members
against the phased in raising of the age to collect both full and
reduced Social Security benefits.
With respect to retirees, we acknowledge that the
recent pension increase was a welcome and badly needed step in the
right direction. Nevertheless, it falls well short of the amount
many retirees need for a secure retirement. Considering the bulging
Pension Trust, it is time for GE to accept the concept of ongoing
pension COLA for retirees.
On the subject of wages, we note that GE’s profit
bonanza has not resulted in any significant improvement in the
living standards of GE workers. Our GE members realized on average a
very modest increase in real wages of about 1.7% per year during the
Contract’s term. Even these small gains are attributable primarily
to lower than expected levels of inflation.
There is no doubt in my mind what CEO Welch would do
with a business segment that produced such a modest rate of return
considering the investment required and the energy expended. Having
accomplished the job of making GE the country’s most profitable
company, it’s high time GE workers are rewarded accordingly.
We place a high priority on negotiating an
improvement in our cost-of-living formula. The present formula now
replaces slightly over 40% of our wage losses due to inflation, a
level of protection that is little more than half what it was twenty
When it comes to job security, beware the false
prophets. GE has for years been using the psychology that if
something is repeated long enough, people will accept it as true.
While there may be in a few cases some validity to the proposition
that job security is "earned" in the marketplace, GE
workers know from bitter experience that the marketplace is only one
part of the equation.
GE continues to shut down profitable plants, divest
itself of profitable businesses, and move profitable product lines
if they don’t measure up to the Company’s ever higher profit
hurdles. Even being number one in your business is no guarantee that
GE will not contract out your job or move it to Mexico, China,
Malaysia or elsewhere. The examples are legion and we will not
bother to list them. GE’s sorry record over the past two decades
speaks for itself.
UE will thus propose a number of measures to improve
the Contract’s job and income security provisions. We will
continue to place a high priority on restricting GE’s ability to
move our work, as well as to put real meaning into the decision
bargaining process, a process which all too often amounts to little
more than a bargaining charade.
We are not however interested in any local
concessions to the terms of our National Agreement, if in fact that
is what the Company’s chief negotiator, Mr. Rocheleau, meant when
he referred to "another way of viewing job security" in
his recent interview.
On the income security front, the UE will seek to
substantially improve benefits for employees affected by job loss.
That must include SERO and the SERO 30 provisions negotiated in
1997, at least until such time as the Company changes its position
on voluntary early retirement before age 60.
We will also renew our demands for more paid time
off, in particular in the forms of an additional holiday, an
improved vacation schedule, and more Sick and Personal leave days,
an area which has remained unimproved for over a quarter of a
Health insurance continues to be an area of
contentious debate between the Union and the Company, and a great
concern of our members. Despite a 20% aggregate decline in basic
medical costs since 1992, GE is apparently gearing up for another
round of medical cost shifting to employees. This despite the fact
that the average GE worker with dependents is now paying about $700
annually in contributions alone for Health Care Preferred (HCP) and
about $900 for Comprehensive Medical Benefits (CMB), including past
COLA diversions. Numerous co-pays add substantially to the bill.
Our position is that GE’s cost shifting not only
has to be arrested, it must be reversed. In addition, we will
propose a number of improvements in our medical, dental, and
disability coverages, as well as improvements to the Medical Care
Plan for Pensioners.
With about 80% of GE employees enrolled in HCP, it
is imperative that it be made fully negotiable on the same basis as
any other benefit plan. The Company’s recent proposal that HCP
contributions be "determined annually by the company" is
Indeed it would seem that some within the Company
would like to see us return to the level of cost sharing that
existed in the insurance plan during the heyday of Boulwarism in
1955. Rest assured that the UE has no desire to return to 1955
either in terms of our insurance plans, or in terms of the length of
the Contract that GE imposed at that time.
In addition to the issues noted above, UE will
propose a number of changes in our existing contract language.
As I noted previously, UE and GE have a negotiating
history dating back 62 years. Our Union has entered into every set
of negotiations since 1938 with a sincere desire to reach an
equitable agreement. The new century notwithstanding, our approach
is unchanged. While we know these negotiations will be difficult, we
fully expect the Company to recognize the contributions made by our
members in a meaningful way.
I have every confidence an agreement can be reached
if we negotiate a contract by June 25 which fairly and generously
goes a substantial way in meeting our members’ desires and
expectations. If we can accomplish that task, they too will have
reason to celebrate in the year 2000.