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UE-GE National Contract Negotiations



Week of 6.19:
Saturday, 6.24
Friday, 6.23
Thursday, 6.22
Wednesday, 6.21
Tuesday, 6.20
Monday, 6.19

Large Table:
Thursday, 6.15
Wednesday, 6.14
Tuesday, 6.13
Thursday, 6.8
Wednesday, 6.7
Tuesday, 6.6
Thursday, 6.1
Wednesday, 5.31
Tuesday, 5.30
UE's Opening Statement
(full text)

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UE has represented thousands of General Electric employees under a UE-GE national contract since 1938.

We are one of only two unions holding a national agreement with GE.

There are 14 unions with GE members which have joined together in the Coordinated Bargaining Committee (CBC) of GE unions.

UE-GE Contract 2000 Archives page ...

Tuesday, June 6th

Hovis to GE:
'Hourly Workers
Should Be Allowed to
Retire with Dignity'

On this page:

Tuesday Morning

A company presentation on the pension plan dominated the day’s proceedings.

In the morning, GE benefits specialist Barbara Beckman offered both a general review of retirement income in the United States and a more specific look at the structure of the General Electric pension plan. Her presentation was frequently punctuated with questions and comments from the UE committee. Union representatives were unrelenting in their criticism of the mandatory employee contributions to the pension fund and complaint that GE management misuses the plan as a business.

Beckman’s observation that the employer has "full risk" for the pension plan provoked an objection from Stephen Tormey, secretary of the UE-GE Conference Board, who reminded the company that with $50 billion in the fund GE faces no risks.

Beckman noted that some defined benefit plans require employees to pay contributions. Questioned by the UE committee she conceded that perhaps about 95% don’t require contributions.

General President John Hovis, Patrick Rafferty of Local 506 and Tormey argued that the contribution subsidizes the pension plan. Workers get back their own money plus a relatively low rate of interest. The contribution, said Tormey, "is a "total and complete anachronism" without any justification.

As in the past, the company described retirement income as a "three-legged stool" of personal savings, Social Security and company pension. Beckman produced recent quotations from the Social Security Administration, the AFL-CIO and the firm Ernst & Young to bolster the GE argument. In response, the UE committee declared, "We’re here to negotiate a significant pension increase. We can negotiate how the GE pension better integrates into Social Security, but we can’t negotiate Social Security. We can’t negotiate personal savings."

"One of the things we look at in my local is how much money there is in the fund, and the company’s ability to pay," said Bill Callahan, Local 751. "We don’t want it all, we want a fair, reasonable share." Added Betsy Potter, Local 618: "Each and every local feels the same."

"Ability to pay is not the measure we’re going to use," responded John Curtin, the company’s spokesperson.

Tormey invited GE to join with the union in opposing the "wild privatization schemes" that would undermine the value of Social Security.

Beckman said the company assumes that employees will see 70 to 80% of their earnings replaced by a combination of Social Security, the GE pension plus their Personal Pension Accounts and personal savings, based on a full career of 35 years. She showed an example of a worker earning $35,000 a year, retiring at age 62 in 2000 after 35 years’ service. The company would expect that 37% of the replacement would come from Social Security, 37% from the pension, and 2% from savings.

The UE committee had several objections to this scenario. First, 35 years is no longer a typical length of service — although this figure represents an improvement over the 40 year-career GE has long used in such presentations. Union representatives said that increasingly workers are retiring at age 60 with 27-28 years’ service, according to the company’s figures. Fewer workers can expect a career of 35 years. Instead, the company brags about its outplacement services. As fewer workers produce the same output, the pressure on those remaining encourages them to move on, said Bob Brown, Local 332, and Bill Callahan, Local 751.

Also, the UE leaders said, savings can’t be predicted and are not guaranteed. "With an income of $35,000, there’s not much scope for saving," observed Betsy Potter. And with about half of those retiring in 2000 taking the survivorship option, the proportion of income replaced by the GE pension falls to nearly 30%. Getting a GE pension that actually had a 37% replacement rate would be "a major step forward," Tormey told the company.

President Hovis blasted the company for being "philosophically opposed to allowing hourly employees to retire with dignity." The replacement rate could be 90% or 110%. And he complained that GE is presuming to "give us a budget" by forcing contributions to the pension fund. "It’s not for you to make these decisions for people. It’s not right that money is sitting in the pension plan."

Tormey said because the company forces workers to make contributions, it claims there’s less income for the pension to replace, and at the same time argues that workers have more retirement money to live on because of the forced contributions. He denounced this practice as "double accounting" and "voodoo economics."

Callahan said that for the company to require workers to contribute to an over-funded pension fund was "fundamentally wrong." Workers know that the $50 billion fund has twice as much money as needed to meet present and future obligations, and they want that wealth to be used for pension improvements, he said.

In her presentation, GE’s Beckman pointed out how the regular pension consists of 1.45% of pay up to $26,000 and 1.90% of pay above that figure. The UE committee said that the system needs to be simplified and improved and that the 1.45% portion be eliminated, so that pensions are calculated with the higher percentage.

Beckman discussed the Personal Pension Accounts, begun in 1989. Participants contribute 3% of pay over $30,000. Again criticizing this forced contribution, Callahan said, "I still haven’t heard a reason for this. Is there a logical reason?" Beckman responded by saying that the contribution has always been part of the plan and that GE’s philosophy is that employees should share in the cost of benefits. "It’s crazy that we’re contributing to a fund that’s so over-funded," Callahan objected. Ted Bradley, Local 1010, was incredulous that GE hasn’t contributed a cent to the pension fund since 1987. Tormey argued that the contributions, like the career earnings formula, represent an attempt by the company to maintain a discriminatory pension plan that benefits management at the expense of workers.

In response to Beckman’s explanation of the 1997 Special Adjustment to Regular Pension, Tormey said it was not really a career earnings update, but rather an adder. He said GE made the adjustment in the belief that the number of workers earning overtime would skew pension figures. Tormey and Hovis told the company it’s unfair to expect workers to work overtime and for the overtime to then affect their career earnings update. Younger workers were unfairly affected by what the union considers a takeaway, Tormey said. "A true career earnings update is necessary," he stated.

The GE Pension Trust, its purpose and uses, provoke considerable discussion. In her explanation of the trust, Beckman stated that benefit levels are not based on investments — on how the fund is doing — but rather on benefit amounts negotiated with the union. However, she also went on to maintain the health of the trust was irrelevant to bargaining over pension improvements, a position Tormey characterized as "absurd." When questioned by Tormey, Beckman conceded the trust exists for the sole purpose of funding GE’s pension obligations. If that’s the case, he said, then the company should stop putting communications into the plant saying a big trust is good. Whether over-funded or under-funded, the pension plan would not be any less secure, Tormey said — GE is obligated to provide benefits.

David Kitchen, Local 506, said that nothing in the presentation so far gave any indication that the company regards the pension plan as providing for the security of the retired workers who made GE successful. GE management operates the pension trust as a separate business, "and there’s been nothing said here to convince me otherwise," Kitchen declared.

Ted Bradley, Local 1010, said that many of his co-workers believe the GE executives are waiting for a change in the law to dispose of the bloated pension fund as they choose. Tormey said that if the only purpose of the plan is to meet GE’s obligation to beneficiaries, the door should be open to dramatic improvements in pension benefits. But, said Hovis, since company profits are tied to the pension fund’s performance, it becomes more difficult to get improvements.

GE representatives said that while no real cash is involved, the costs of the pension plan are charged to the individual businesses. Under questioning from Tormey, they admitted that GE businesses also receive credit for the pension fund’s "profits." "And so now we have another reason for the trust to grow and grow," Tormey said. Last year’s change in the Plan’s interest rate assumptions reduced plan liabilities by $2 billion, many times more than the cost of every union proposal to improve the pension.

"We can have a very, very dramatic increase in benefits for retirees and future retirees without in anyway undermining the soundness of the trust, which you say is there for just one purpose," Tormey told the company. "But it turns out that the trust is being operated for another purpose" — to improve the company’s standing on Wall Street.

The UE committee dismissed the company’s complaints about the pension plan’s "competitive disadvantage." One potential competitor missing from the company’s list — General Motors — offers considerably higher benefits, the GE representatives admitted.

GE’s pension benefits are paid for by the over-funded trust; the money doesn’t come out of operations, the UE committee said. The trust doesn’t cost GE a cent, instead, it makes money that benefits GE businesses and provides GE with a competitive advantage. But no matter how well the pension fund does, GE workers can never expect better benefits, under the company’s philosophy. "We don’t buy it. The members don’t buy it," declared Tormey. UE members understand the $25 billion pension fund surplus, he told the company.

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Tuesday Afternoon

In the afternoon, GE benefits specialist Tom Conway examined specific features of the pension plan, including vesting, disability, survivor benefits, successor employer and job loss events.

The UE committee said the disability benefit is long overdue for updating, particularly the 12% reduction in the benefit before age 60.

Discussion on the Special Early Retirement Option (SERO) and other benefits tied to job-loss events rekindled the debate over the purpose of the pension trust. Conway said the SERO-30 part of the window in 1997 was "a costly experience," with outlays resulting in an additional $213 million charge to GE businesses in the fourth quarter of 1997. A total of 5,349 employees (hourly and non-exempt, union and non-union) took advantage of SERO.

While there was no cash flow from operations, GE businesses were "charged" for the expense — and the bottom line was smaller in the fourth quarter that year. "The real surprise was on Wall Street," said Tormey. Decisions about the pension fund should be based on the needs of the beneficiaries, not on Wall Street or shareholders, he insisted.

"You’re reluctant to improve benefits because of constituencies which have nothing to do with the fund," Tormey said. "We’re tired of it." The pension fund is not an investment vehicle. This issue will not go away, Tormey said. UE will bring it to every public forum if GE persists.

GE spokesperson Curtin said, "We are concerned about what Wall Street thinks."

But was there really a problem? the UE committee asked. The over-funded pension trust easily accommodated the larger-than-expected outlay. The fund has $16 billion in "booked" profits which haven’t even shown up on the balance sheet yet, and will further bloat the fund in years to come. Further, due to accounting rules, the pension fund provided GE with pre-tax profits of $1.3 billion last year. And GE’s actual obligations declined by $2 billion, the union pointed out.

David Adams, Local 506, pointed out that the GE pension fund provided $345 million of the $820 million invested in the purchase of the swank Pebble Beach golf courses in southern California — an amount far in excess of the monies spent on SERO.

The company should not have been surprised by the number of workers who took advantage of the SERO window, said President Hovis. "We’ve been telling you at the table that our people want out," he said. Besty Potter, Local 618, and Bob Brown, Local 332, confirmed that many GE workers want to leave the company because of the stress levels. By closing profitable plants, the company had no one but itself to blame for the number of workers exercising the SERO option, suggested Ted Bradley, Local 1010.

GE’s Conway said that layoffs, not plant closings, and the expansion of eligibility, fueled the unexpected use of the program.

David Kitchen, Local 506, announced that with operating expenses showing losses as a result of SERO, "it’s no surprise to us that there is less transfer of work and contracting out of work and more attrition." The company is retaining the work in its plants but not the jobs. Jobs are being doubled and tripled, he said. And Kitchen questioned why the company has a plant-by-plant SERO quota and asserted that its use has been manipulated. Pat Rafferty, Local 506, said that jobs have disappeared through attrition while the company avoids hiring new workers or paying SERO.

Bill Callahan, Local 751, said the company’s experience with SERO shows the need for "30 and out." He said he was informed just yesterday that his plant in Niles, Ohio will probably lose between 30 and 35 workers, making SERO an important feature. "We’re not looking to lose or give that up because of some misjudgment." Hovis pointed out that at the company’s unorganized Parkersburg, W. Va. plant, it has suited GE to have a more liberal, continuous SERO.

David Kitchen, Local 506, raised issues of the application of SERO’s replacement pool, and particularly the denial of the SERO 30 feature to incentive workers who take an 18% cut or more in earnings. Tormey commented that with this benefit, negotiated in 1997, workers have to take "a nasty fall in pay." He characterized the benefit as more symbolic than real, saying there is probably only a small number of people who will ever be able to use it.

GE’s Curtin said that this was negotiated as a safety net position which he does not expect to see changed.

Pat Rafferty, Local 506, "We want a balanced contract, but that doesn’t take away the strong desire of many older workers to find a replacement and leave early." Joyce Sumner, Local 332, reiterated the demand for "30 and out."

In concluding for the union, Tormey said, "We believe the company has room for substantial improvements by making use of the surplus."

The negotiations recessed with the union scheduled to present job and income security proposals on Wednesday. The union’s own pension proposals will be forthcoming next week.

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