Tuesday, May 24, 2011
Mr. Hovis, Mr. Tormey, and members of the CBC delegation ... I would like to welcome you all to the first day of 2011 GE - UE National Negotiations. It is truly on honor for me to have this opportunity, now for the second time, to serve as GE's lead negotiator with the UE at the national level. Before getting into some specifics, I first want to acknowledge a few people in the room who deserve special recognition.
Mr. Hovis, I believe you have announced you plan to retire later this year after successfully negotiating eight contracts with GE, beginning with 1985 negotiations. Mr. Tormey, I believe you plan to retire at the end of the year, after seven successful GE negotiations to date. Your achievements in labor relations over the years are well documented. All who have negotiated with both of you over the years use words like ... tough ... fair ... honest ... knowledgeable ... trustworthy ... and solution-oriented to describe the way you have worked with GE. I agree, and expect the same during these negotiations. I personally wish you both health and happiness in your future retirement, but before you get to that stage, you have one more to go and we have a lot of work to do over the next four weeks. Our employees are depending upon us to negotiate a fair and competitive job package, so let's work together to make this happen.
As I look around the table, it is good to see some familiar faces from 2007, I would like to welcome you back and welcome those who are here for the first time. I would be remiss without mentioning that two former UE negotiators from 2007 -- Marcia Barnhart and Ed Baran -- are no longer with us: both have passed away. They were good employees, good union members, and most importantly, they were good people. They will be missed.
On the GE side, I'm fortunate to have with me a skilled GE negotiations team that you and your team know well. Doug Baker, will be participating in his fourth national negotiations. Doug has been a key member at the Fairfield UR team for over 12 years and has extensive background in multiple areas. Kevin Fitzgerald is back for his sixth negotiations. He is clearly recognized as an expert in many areas of GE benefits, and I'm happy he is part of our team once again. Mallory Herr will be our note taker. Mallory is presently on GE's Human Resources Leadership Program, on assignment with the UR team. She has worked extensively on projects in preparation for these negotiations. Our team looks forward to working with you, the UE committee and the other members of the CBC delegation over the coming weeks.
Mr. Hovis, Mr. Tormey ... you have been through this process many times, but I think this time is truly different. As I listen to your opening comments, and having worked with you and the UE for many years, I believe I understand the commitment you have to your members, as well as the perspective and passion you bring to the issues before us. As I prepared for this round of negotiations, I looked back at opening comments in 2007 and couldn't help but think of how the world and business have dramatically changed in just four short years.
We negotiated a contract unaware that just over a year later we would have the largest financial crisis since the Great Depression. We have seen multiple bank failures, and we have witnessed companies, like GM and Chrysler, go bankrupt, in part, due to unsustainable wage and benefit plans. May I remind us all that just a few years ago, the unions tried to convince us that the benefits plans at these companies were the types of benefits plans GE should follow. We are often told that we only look at short term views on running the Company, the changes we will suggest will be clearly focused on the long term competitiveness and health of our many diverse businesses.
Other significant changes since the last contract ... we have seen unemployment rates skyrocket, still hovering around 9% today, and the underemployed continues to grow, currently at about 17%. Although there has been some recent improvement in these numbers, I think we would all agree that we still face a fragile economy and a slow recovery.
We have seen many changes on the political landscape, as well, including a new U.S. President and major turnover in Congress that has led to a divided government. We have seen the addition of a national healthcare plan, the Patient Protection and Affordable Care Act, plus additional government regulation that will add even more cost to our business operations, impacting our competitiveness.
Over the past four years, we have experienced unprecedented change throughout all of the GE business segments. In a business with which you are very familiar, we witnessed two years of Locomotive backlogs disappear almost overnight, resulting in the elimination of almost 1,700 jobs. As the housing market collapsed, we watched our Appliance business struggle for every sale - and the business is still struggling today. We have seen the government implement laws that have changed - and continue to change - the face of our Lighting business.
Few would argue that this tough economy has forced us to fight our competition for every sale. We have had to re-evaluate our business models and reset the company to the new realities of doing business in this climate. As you know, each GE business must be positioned to win profitable orders against its competitors to ensure long-term success, investment and provide good jobs for employees. We will discuss competitiveness often over the next four weeks. We will hear from operating managers within the different business units to understand the challenges they face when competing for orders, investment dollars and growth that would lead to improved job security.
I expect that the next four weeks will be challenging, with a lot of intense dialogue. Like contracts in the past, the topics will be similar. We will discuss healthcare ... pensions including defined benefit and defined contribution plans ... wages ... job and income security ... SERO ... plus many other areas that are important to the company and our employees. I believe we share the challenge and the responsibility of negotiating and producing an overall package that will position our businesses to compete in a global marketplace, while offering a compensation and benefits package that is competitive in the communities in which our employees work and live and with the industries in which we compete. As we all know ... GE jobs are and will continue to be the best manufacturing jobs in the community.
Over the course of four years, we have had opportunities to hire at a number of locations. What we continue to see is GE jobs by far are the best jobs in the community. Some will point to job loss over the lost four years; I would like to point out the thousands of jobs and millions of investment dollars that GE has committed to our businesses. In Appliances, GE has committed $1 billion dollars since 2009 to completely renew the Appliances business. We have seen 10,000-plus applicants for 300 jobs in Louisville that pay based on competitive community and industry standards.
We have seen more than 5,000 applicants for 100 openings in Erie in a four day posting period. When we hire in Erie, we know that we are paying almost two times the local community wage rates, and our benefits are unmatched and cherished by those who dream of on opportunity to be a GE employee. We also know this is significantly higher than the competition the Transportation business faces. Ultimately, within communities like Erie, we have thousands of people hoping for a chance of a job at GE. When we talk about the GE job package, there are three key aspects that attract and retain our employees.
First, new and existing employees care about wages. They want wages that are attractive in their community and that recognize the skill, care, responsibility and environment in which they work. For our existing employees, wage rates continue to be far above community levels, and in most cases, well above industry rates also. Inflation has remained relatively stable, and once again, our UE employees have seen strong real wage growth of approximately 7.4% over the last four years.
Another key topic is healthcare. Both new and existing employees want affordable, quality healthcare. The facts are that the cost the company pays toward a production worker's healthcare is now more than $10,000 per year and continues to increase at two times inflation rates. It is clear to us that our existing healthcare platform masks the cost of service, and this must change. We need our employees to understand the costs associated with their decisions, and we need every employee to take a more active role in using benefits wisely and controlling cost. The healthcare plans we offer today are, by far, some of the best in town, and I believe when we are done, the new plans will continue to offer excellent benefits, while helping our employees to be better healthcare consumers.
I would also like to discuss retirement. If you think back to when you were hired, like most of us in this room, you probably didn't think too much about retirement benefits. I'm sure most of us did not make the decision to work for GE based upon what the pension formula was and what it might payout in 35 years. As we all know, defined benefit plans are rapidly being eliminated. There are many reasons behind this, including increasing regulations and the potential volatility and unpredictability that these plans can bring to a company's bottom line. We believe that defined contribution plans provide flexibility for newly hired employees today and can also provide long-term financial security after a full career of work. I believe that this type of retirement program will be very attractive to new employees, while maintaining, and possibly even improving, our existing pension plan for present employees. I believe either of these approaches coupled with our outstanding Savings & Security Program, plus Social Security, will provide an excellent retirement for long-service employees.
The final topics I would like to touch on are the Special Early Retirement Option (SERO) and SERO windows. As we all know, SERO is part of the Job & Income Security language and expires on June 30th. This benefit was added to address job-loss events for long-service employees and for that purpose, has served the Company and our employees well. However, SEROs have become extremely expensive, directly impacting the operating costs of individual businesses. SEROs are restrictive and ultimately cost jobs.
I believe SERO window events also no longer make business sense, this is based on the impact to operations and the extreme high cost that we see during these actions. Early retirement trends have changed in recent years for a variety of reasons. The fact is people in the country and in GE are retiring later. Benefits paid by underlying programs like Social Security have been adjusted to encourage later retirements. It is also important that we retain the skills and knowledge of our most experienced people. I look forward to hearing your ideas on these subjects.
As I mentioned earlier there is little doubt that GE jobs are among the best jobs in the community today and I believe they will remain at the top after this negotiations is complete. We will have jobs that attract the best and brightest where we work. Your members demonstrate on a regular basis that we have some of the best employees in our communities and we are fortunate to have them. As we have seen through the job application process, the competition for a GE job is fierce, thousands from the community apply. We expect to continue to attract the highest quality applicants, and our ability to retain employees has been demonstrated for many years and I expect no change in this.
We have a lot of work to do in the weeks ahead. I'm sure you have come prepared with many ideas and proposals. I look forward to the spirited debate that I'm sure we will have on these and many other issues. I believe we will find a way again - just as we successfully did in 2007 and over the past decades to negotiate another fair and competitive contract between GE and the UE. I have confidence we will get the job done again.
I look forward to shaking hands once again on June 19th on a deal in which we will all be proud. You have my commitment and the commitment of this team to work as hard as we can to get a deal done. Thanks for listening.