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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 13th

GE: 'Service, Not
UE Negotiators
Pound Pension Plan

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Additional Information:

Tuesday Morning

Negotiations resumed with a company presentation on GE’s businesses that emphasized the shift towards services, followed by a union presentation on the GE pension plan and a lengthy consideration of UE pension proposals. On this long and productive first day of the third week of national bargaining, the UE committee gained Pat Campbell of Local 731 (replacing Pat Wojtowicz), and Lynda Leech, Local 618. Bob Roberts of the IBEW sat at the UE table and UE Research Director Lisa Frank rejoined the deliberations.

Robert W. Nelson, GE vice president for corporation finance and planning, presented a profile of a successful, broad-based and expanding company. GE’s record performance continues in 2000, with revenues up by a "really unusual" 15% in the first quarter and on track in the second quarter. Products represent a diminishing share of company employment and particularly revenues and earnings, with service and "original manufacturing" service together accounting for nearly 75% of profits.

By redefining GE’s markets, with an emphasis on service, the company has dramatically improved market share and revenues, Nelson said. The most dynamic example is Power Systems, which GE now defines as extending from ‘well-head to consumption’, providing products and mostly services for the entire cycle. "GE Capital, the company’s biggest entity, is a leader in thinking of markets in a different way," he said. The purchase of a lawn mower at Home Depot on credit goes through GE Capital, which also finances high-tech businesses such as Microsystems and Lucent. GE is now a major player in the insurance business. GE has a global position in key financial service markets and is involved in consumer finance in 30 countries. When Europe’s banks restructured, GE Capital gained entry. Taking advantage of the collapse of Asian financial markets, GE moved into Japan’s credit and personal loan markets.

Entering the 21st century, 70% of GE revenues come from services, Nelson stressed. Expansion into service has resulted in increased sales in aircraft engines, medical systems, power systems and transportation. E-commerce (sales through the Internet) is a recent arena for expanded sales.

GE, Nelson concluded, is "a 21st century solutions company ... in large, expanding markets with global scale."

Stephen Tormey, secretary of the UE-GE Conference Board, commented in response, "We’ve been a little too modest in what we’ve asked of the company."

In answering a question posed by Patrick Rafferty, Local 506, Nelson confirmed that significant profits continue to be generated by GE’s core manufacturing businesses. But he indicated that the service component will continue to grow while manufacturing shrinks.

Rafferty and Betsy Potter, Local 618, said workers in the Erie, Pennsylvania plant have not benefited from GE’s business expansion, despite their contributions. The Erie workforce has been denied the opportunity to service locomotives, work that is instead done in Mexico; locomotive testing work has been subcontracted. "You talk about a world-class product, what about the people who are making it?" asked Lynda Leech, Local 618.

General President John Hovis pointed out that the hard work of UE members in Erie boosted GE’s share of the market to 70%; from 320 locomotives a year in a 92-day cycle, Erie workers now complete 910 locomotives annually in a 20-day cycle. "What more do people have to do?" he said. "How much more productivity do they have to achieve," before the company is willing to afford them opportunities like the servicing work done in Monterrey?

Hovis said GE management should have to face the people whose lives they have devastated through loss of jobs. The company looks only at the bottom line and ignores the human dimension of its business decisions.

A comprehensive, detailed UE pension presentation made the case for a broad range of substantial pension improvements. The presentation, delivered by Tormey, looked at plan funding, some problems with the GE plan, the GE pension business and some solutions.

(Excerpts from the UE Pension presentation can be viewed online; they may be viewed in your current browser window or opened in a new window)

The fund’s fair market assets have doubled in just five years, to $50 billion. In the same period, 1994-99, the projected benefit obligations have remained relatively flat; the fund has nearly twice as much money as required to meet obligations. The fund’s surplus has increased by 250% over the past five years. Compared to the total assets of entire companies (and not just their pension plans), the GE pension fund surpasses those of Boeing, Hewlett-Packard and USX, and compares favorably to Time Warner and Bell Atlantic. If the GE fund was a company, its huge net worth would beat out those companies and IBM and General Motors, too.

By the same measure, the GE pension fund dwarfs the entire net worth of GE "competitors" DuPont, Raytheon, Dow, United Technologies, Emerson, Rockwell and Whirlpool.

The GE plan is self-supporting, with annual income greatly exceeding annual benefit costs, and rising. And as the surplus outstrips obligations, this "profit" is credited to GE businesses. The GE plan takes in more than it pays out. In 1999, the GE plan paid out less than $2 billion in benefits and enjoyed a return on assets of more than $8 billion. The considerable wealth of the plan has been augmented by more than $1 billion in employee contributions since 1989. GE, meanwhile, has not contributed to the fund since 1987; its average annual contribution 1979-1985 was $435 million. "This is a tremendous windfall for the company," said Tormey.

GE employees’ Personal Pension Accounts (PPA) subsidize the fund, the union said. A chart comparing PPA rates with the pension fund’s return on investment revealed sometimes dramatic gains by the fund. "You take our money, give us five-plus percent and then make between 15 and 20%," Tormey said. "This is worse than usury."

GE workers face a triple whammy with the accounts, Tormey said. Their money is taken to subsidize the plan; their PPA is used as an excuse for a smaller pension benefit; and subtracted from the income that the pension is supposed to replace.

Turning to problems with the plan, Tormey pointed out that the pension provided by the guaranteed minimum tables represents a benefit equal to only 1% of pay. "This is supposed to be our safety net, what we rely on if we don’t make it on Career Earnings, but it is more of a sieve than a net," he said. A significant number of hourly workers continue to rely on the guaranteed minimums, including 38% of workers retiring in 1999. Within UE’s ranks, 41% of those retiring between July 1, 1997 and March 29, 2000 retired on the guaranteed minimums, 45.5% excluding disability. The earning replacement rates for average UE retirees (Feb. 1, 1997-March 29, 2000) were: 27% optional; 32% SERO; 21% disability and 53% SERO plus supplements. The 1999 figures are mostly worse — 31% SERO, 19% disability and 50% SERO Plus.

As pensions are tied to wages, flat wages in the 1990s have led to flat pensions, in real dollars. GE wages increases, adjusted for inflation, failed to advance wages beyond $12 an hour in the 1990s in terms of actual purchasing power.

Looking next at the discriminatory nature of the Career Earnings Formula, the union presented charts that show how the formula favors higher-paid GE employees. In one example, a worker earning $39,000 a year would accumulate only 45.7% as much as an employee earning twice as much, and just 29.6% as much as another earning three times as much. Assuming all three worked for 15 years (without a salary increase or inflation), the lowest paid would have to work for 37 additional years to receive the same pension as the highest paid. The plan is skewed to benefit the better-off, Tormey explained, supposedly to compensate for the higher replacement the lower paid receive from Social Security. In reality, lower paid workers pay S.S. on all of their earnings, unlike their higher paid counterparts in the plan.

Updates are formulated to preserve the plan’s inherent discrimination, so that the rich continue to get richer, Tormey maintained.

Under the heading "Speed, Simplicity and Self-Confidence?," the union presented a page from a GE benefit book to demonstrate the unwieldy complexity of an earnings formula update.

Despite adjustments in the benefits of active retirees, GE pensioners have continued to lose purchasing power, the union said. A chart showed how the average 1981 retiree suffered a 9% loss of purchasing power; the average 1986 retiree 22%; and the average 1991 retiree 12%. The 77,000 hourly retirees receive an average of $553 a month; the 12,000 current surviving spouses an average of just $260.

The GE pension falls short of other major industries, including auto, aerospace and steel. The West Coast longshore union (ILWU) negotiated a $90 multiplier, $95 in 2001, with a 35-year cap. UE-represented workers employed by companies far smaller than GE enjoy pensions that exceed some or all of the GE tables. The average multiplier at Deerfield Plastics (UE Local 274) is $48; Asea Brown Bovari workers receive a 2.5% career formula.

"What about industries we actually compete in?" asked John Curtin, the company’s chief spokesperson. That’s answered by the huge size of the GE pension fund, and how it dwarfs the total assets of so many GE competitors, replied Tormey.

Using a page from GE’s 1970 benefits book the union pointed out how the company continues to penalize the disabled with a 12% reduction in their pension benefit.

The union called the company’s attention to the 1987 law that gradually raises the age for retirement with full Social Security benefits, from 65 to 65 and 2 months for those born in 1938 to 67 for those born in 1960 or later. The age to receive 80% of Social Security benefits is also rising.

Why should a pension plan with such a phenomenally healthy fund have so many problems? the union asked. Part of the explanation lies in hide-bound tradition, some in simple greed. Another explanation is what UE terms "The GE Pension Business."

Due to accounting rules, GE was able to report almost $1.4 billion in profits from the pension plan on its books in 1999. The amount of money GE is able to show on the balance sheet becomes a driving force in how decisions are made about the plan, Tormey charged. Barbara Beckman, GE pension manager, objected that accounting rules require the company to report pension income on its books. Nevertheless, Tormey responded, decisions about pension benefits should not be made as a result. And more than $7 billion from the pension plan over the last decade has appeared as operating profit on GE’s books.

Those pension profits compare favorably to other GE businesses. Last year’s pension surplus beat out the revenues of GE’s plastics, technical products and appliance businesses and NBC. In its overall portfolio, the pension has become a significant factor, Tormey said.

Quoting an article in the National Post, Tormey pointed out how these pension profits add considerably to GE’s overall profit statements. GE has accumulated $16 billion in actuarial profits from the pension plan not yet put on the balance sheet which he said will be used to ensure a smooth, upward earnings curve for Wall Street’s benefit. This is why the unexpectedly larger outlays on the Special Early Retirement Option (SERO) upset the company — not because of the impact on the overfunded pension plan but rather because of how the cost of SERO affected the company’s reported earnings.

GE uses the pension plan to "manage" earnings," the union said. Largely by increasing the discount rate on the plan from 6.75% to 7.75% last year, GE wiped out $2 billion in projected benefit obligations. When returns are greater and compensation less, GE "books" future profits. Due to the 1996 retiree benefit increase of about $100 million, GE was able to restate the discount rate and reduce its liabilities by about $200 million, for a "net profit" of $100 million. In other words, GE actually profited from the 1996 retirees increase, but didn’t tell anyone, even as it took public relations bows for the raise.

The union revealed how GE used the pension plan to help defeat the 1995 UE organizing campaign at the company’s Parkersburg, West Virginia plastics plant. The company pledged there would be no layoffs — but at the same time offered a wide-open SERO benefit not tied to a job-loss event, in order to downsize the plant without layoffs. That could only take place, Tormey said, if SERO was run differently than as provided for in the Pension Plan. The company then threatened to lay people off and run SERO in a more restrictive fashion if the union organized the plant. This is an example of the abuse of the plan for purposes having nothing to do with what the pension is for and represents a breach by the company and plan trustees of their fiduciary responsibility to plan participants.

The union charged the company with conflicts of interests in the management of the plan. UE noted that all of the pension plan trustees are employees of the General Electric Investment Corporation (GEIC), a division of GE Capital. GEIC manages the pension trust and uses its position to get outside customers and to raise profits for GE Capital. (The plan’s administrative costs increased sevenfold between 1986 and 1998.) The same accounting firm audits both the pension and the regular GE corporate account. GE common stock now represents 9.8% of pension trust assets — but there is no independent employee representative among the trustees. And there is no check on GE investments of pension dollars, including those used against the interests of employees, UE said.

Some solutions would include building on the positive changes to the plan negotiated in 1997, eliminating the negative aspects of that settlement, revising the company’s outmoded pension assumptions and inclusion of long overdue reform. The pension plan must be run as a benefit plan, not as a business, the union insisted. "In many respects it’s a good plan, with many positive features that we’ve worked hard to achieve," Tormey said.

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Tuesday Afternoon

A lengthy afternoon session was devoted to detailing the union’s pension proposals.

UE called for substantially increased benefits — both career earnings and the guaranteed minimum formulas. The UE committee also proposed a career earnings "update" of past service. The union emphasized the need to substantially increase the guaranteed minimum tables while offering its willingness to discuss with the company a variety of ways of fundamentally improving the formulas.

UE insisted that the company simplify and end the discriminatory nature of the career earnings formula, by eliminating the rate step in favor of the 1.9% or a higher rate.

The union made a strong case that GE should provide an automatic cost-of-living adjustment for present and future retirees. "It’s an absolute necessity given pension levels," declared Pat Rafferty, Local 506, who said he frequently hears from pensioners who are having a hard time making ends meet. Betsy Potter, Local 618, said that after the latest adjustment, her 82-year-old mother receives a net monthly GE pension of just $177. She retired in 1978 after 14 years’ service, not including World War II employment — she was not permitted to "buy" her back service. GE’s Curtin commented that GE’s philosophy is that retirees should not rely on the pension alone — they should also look to Social Security and personal savings. At age 82, the "third leg of the stool has been gone a long time," Potter replied.

Raising a family on GE wages doesn’t allow workers much of an opportunity to save, objected Bill Callahan, Local 751. Retirees shouldn’t be placed in a position where they are forced to find jobs, he added.

The company should at least consider a mechanism that prevents retirees from falling below a rate equal to the minimum multiplier, suggested Tormey.

UE called for an end to the compulsory employee contributions to the pension plan. Tormey said the company should give workers reparations equal to the amount their contributions earned for the pension fund.

The union proposed that: the guaranteed minimum pension be based on the highest three years of earnings in the last 10, consecutive or non-consecutive; the regular early retirement supplement be increased and the disability supplements be adjusted accordingly; all reductions for disability pensions be eliminated and eligibility requirements for disability pension be reduced; and that the $325 special supplement be retained and substantially increased, and that the eligibility for the special supplement be reduced from 25 to 20 years.

The UE committee called for a new supplement to run from age 65 to the age of full Social Security retirement for employees retiring at age 65, and for a supplement that will allow workers to continue to retire at 60, due to the changes in the Social Security system. The union said that early retirement supplements should continue until the statutory age under which 80% of Social Security benefits are paid, including supplements for those presently retired under SERO and the Plant Closing Pension Option (PCPO).

The union argued that anyone affected by a job loss event be eligible to retire based on the eligibility requirements now existing under PCPO.

The union and company clashed over continuation and improvement of SERO and early retirement. GE spokesperson Curtin reminded the UE committee that SERO expires with the expiration of the present contract. President Hovis declared that the union would consider loss of SERO "a takeaway." "This is an extremely important issue for us," stressed Bill Callahan, Local 751.

UE called for a full pension at age 55 with 25 years’ service or with 30 years’ service, regardless of age. GE’s Curtin said the company "doesn’t want to hear it."

"You want us to do whatever we can to increase your productivity and your profits, you give us more machines to run and increase the hardship on us," objected Pat Campbell, Local 731. "You have a lot of money in that pension plan," she added, terming the company’s objections "utterly ridiculous." Bill Callahan, Local 751, and Pat Rafferty, Local 506, said that speed-up and "management by stress" leave workers hoping for an early exit. President Hovis pointed out that workers in Erie and elsewhere would like to retire early before their jobs disappear.

The union also proposed that GE recognize UE as the bargaining representative of retirees, substantially increase retirees’ pensions and provide the union with copies of all significant documents and data relating to the pension plan.

Negotiations will resume Wednesday morning with UE proposals on medical insurance.

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