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Company Pension
Presentations Open
Second Week of Bargaining
NEW YORK, May 27 — Bargaining resumed for the second week at 1 o’clock on Tuesday afternoon with a larger UE
committee strengthened by the presence of Dave Kitchen, Local 506, and Marco Coeur and Bill Wossum, Local 1010. The
union committee received a series of three company presentations on the GE pension, Savings and Security (S&SP) and
job and income security plans. Two Human Resources officials assured union members that GE is considering pension
improvements despite a tough economic environment and the costliness of its current benefits. UE leaders, in questions
and comments, indicated their commitment to substantial pension improvements that GE workers deserve and that GE can
easily afford.
GE’s Mike Gorman reviewed the pension plan in some detail, reiterating the company’s longstanding position that
personal savings, Social Security and pension benefits together represent retirement income.
Responding to charts on replacement income presented by Gorman, Steve Tormey of UE objected to the depicted blending
of Personal Pension Account (PPA) money and company-paid benefits. "You’re replacing our money with our
money," he pointed out; the question is, what is GE contributing to workers’ retirement income? Tormey also
zeroed in on the issue of pension costs being "charged" for accounting purposes to GE businesses. On one hand,
the company shows pension-fund income as revenue, but on the other hand it charges businesses for pension expenses. In
fact, Tormey said, "The pension has cost you nothing in terms of actual cash." And despite the economic
climate, GE’s competitive edge has widened, not closed, due to the wealth of the pension fund and losses experienced
by other companies. GE CEO Jeffrey Immelt says the company is not expected to resume making contributions to the pension
fund, Tormey observed. Meanwhile, as Gorman admitted, GE is almost alone among companies requiring employee
contributions to defined benefit pension plans.
Despite the company’s emphasis on personal savings and Social Security, the purpose of these discussions is to
investigate whether the pension benefit is adequate and to negotiate improvements, the UE committee maintained.
Gorman, in explaining how the guaranteed pension program operates, observed that the plan "automatically
recognizes increased pay and service." Tormey, in response, pointed out that because of temporary layoffs and
bumping, GE workers can no longer count on regular annual pay increases. Further, a larger benefit from longer years of
service is not the same as an improvement in the plan structure, he said. So instead of an increase in the pension
benefit of 24 percent, as claimed by Gorman in looking at a "sample" GE employee over the past three years the
actual improvement amounted to just 7.3 percent—or slightly over 1 percent, when adjusted for inflation.
The assets of the GE Pension Trust have declined from a peak of $50.2 billion in 1999 to $37.8 billion in 2002,
Gorman pointed out; the trust’s surplus has declined from $24.7 billion in 1999 to $4.5 billion in 2002. While the GE
representatives pointed to payment of pensions as a factor, they readily conceded that the stock-market downturn and
decline in interest rates have had far more impact on the level of assets than benefit improvements. David Kitchen,
Local 506, argued that pension improvements can be based on how well GE is doing overall. The company has enjoyed the
benefits of pension-fund revenues all this time without the outlay of any cash. "Historically and today the pension
fund is sufficient to grant improvements relatively painlessly," Tormey said.
"We’ve made a promise to pay pensions and we will," said John Curtin, chief GE spokesperson.
GE’s Barbara Beckman reviewed the company’s savings program (S&SP), describing it as "a very competitive
defined contribution plan." Like Gorman before her, she noted the trend on the part of employers to shift from
defined benefit plans (like the GE pension plan) to defined contribution plans (like 401[k] plans). Beckman argued that
S&SP will become increasingly important to GE employees, as government and employers respond to aging demographics
and global competition by shifting more retirement costs to individuals. Ed Baran, Local 751, asked how GE’s savings
plan match (50% of 7% of employee contributions) compares to other companies. Beckman said that some companies are
moving to a lower match; GE has been in the top 50 percentile. "We’re not the best, but we’re
competitive," she said.
Beckman gave a detailed presentation on job and income security programs, recognizing the considerable union
contribution to their evolution. She noted that the Special Early Retirement Option (SERO) and Special Supplement
Benefit Option plans expire with the end of the present contract. "Rising health care costs and pension
improvements make SERO and SERO 30 increasingly expensive to provide," she said. Beckman said the company regards a
cap on the number of Replacement Window SERO retirements as essential to predicting the financial impact. Financial
prediction is important to how these costs are reported to Wall Street. The union is not going to negotiate the pension
based on Wall Street expectations, Tormey observed.
Bob Brown, Local 332, wondered if the presentation shouldn’t report the offset GE gained by hiring replacement
workers at lower wage and benefit levels. (More replacements came as new hires rather than from recall lists.) The
bigger question, proposed Dave Kitchen, Local 506, is the overall savings pocketed by GE through job transfers, layoffs
and plant closings. "I’d guess that if GE wasn’t saving money in the long run it wouldn’t be giving us these
benefits," he said. Beckman replied that, "from a Human Resources point of view, it’s a benefit and it may
be a deterrent (to job loss)." Union members quickly interjected that they hoped it was a deterrent. GE’s Curtin
confirmed that the benefits negotiated by the union are a factor the company considers when weighing job reduction.
UE’s Tormey reminded the company that benefits related to job-loss formerly came out of day-to-day operations.
"SERO evolved so that the company has largely been shielded by paying these benefits out of the gargantuan pension
fund," he said, adding, "There’s no cash-flow price to be paid for SERO, it’s all in the pension
plan." Bob Brown, Local 332, told the company that without the cap, more Fort Edward workers would have more
seriously considered the SERO Window program. Beckman said that 72% of the 850 employees who took advantage of the
program were union-represented; Ed Baran, Local 751, said Niles/Mahoning workers believed that opportunities to take the
SERO Window should not have been limited by the 850 cap. If the company wants to reduce SERO costs, the solution is no
more "job-loss events," the UE committee said. GE’s Curtin responded, "There will be more job-loss
events, I assure you."
Continuing with her detailed presentation, Beckman reviewed GE Education and Training benefits and the preferential
placement program. Bob Brown, Local 332, complained of inconsistencies in the program’s operation. Noting that one GE
plant in his geographical area was hiring for a time, and Fort Edward plant employees on layoff were never informed of
this opportunity to take advantage of preferential hiring.
Beckman reviewed the Job Preservation aspects of the contract, and recognized the UE role in expanding contract
language. She said the lesson was "local involvement can make a difference." Dave Kitchen, Local 506, from his
extensive involvement with the Erie Job Preservation Steering Committee, had a number of detailed questions on how these
committees have functioned elsewhere in the company, to which Beckman had no immediate answers. The information is
maintained at the business level, interjected Curtin; "we don’t have company-wide statistics." President
John Hovis said that the company’s conduct of business-level reviews under this program failed to provide adequate
consultation with the union as mandated by the contract.
Tormey took aim at the company’s insistence over the years that 25 years of service be required to qualify for
income security provisions. From the afternoon’s presentations it was clear that average length of service at
retirement is 28 years—which means that 25 years is too long and many workers who lose their jobs are ineligible for
negotiated benefits, such as SERO, continued insurance until age 65, the Special Supplement Benefits Option (SSBO). The
company seems to be indicating that it will offer something similar to its 2000 proposals with regard to SERO, Tormey
said.
"Your assessment is correct," Curtin said. "We’re looking at things more closely associated with
what we did last time than with breaking new ground."
Negotiations resume at 9 o’clock Wednesday morning with a UE presentation on job and income security.
At the UE table today were General President John Hovis; UE-GE Conference Board Secretary Steve Tormey; Research
Director Lisa Frank; Bob Brown and Dave Dennison, Local 332; Frank Fusco, Dave Kitchen and Pat Rafferty, Local 506; Ed
Baran, Local 751; Marco Coeur and Bill Wossum, Local 1010; Bob Roberts of the IBEW, Wayne Reynolds, UAW; and Mike
Barrow, American Flint Glass Workers. International Representative Chris Townsend represented UE at the IUE table.
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