Opening Day Remarks by John Gritti GE-IUE/CWA Negotiations London Hotel New York City, NY June 1 st, 2015 President Clark, Chairman Santamoor, Mr. Shelton, IUE/CWA national negotiations team and members of the CBC delegation, I would like to welcome you all to the first day of 2015 GE IUE/CWA National Negotiations. It is an honor for me to have this opportunity to serve as GE s lead negotiator with the IUE/CWA at the national level. As many of you probably know, I led negotiations for GE at the UE national table in 2007 and 2011. Being here, across the table from many of you, with whom I have bargained many times over the years, is a privilege and an opportunity I realize is special. Before getting into any specifics, I first want to acknowledge a few people in the room. As I look around the table, it is good to see many familiar faces I have been dealing with in some cases, for almost two decades. I would be remiss if I did not recognize some of you.
First, the IUE/CWA-GE Conference Board, led by Bob Santamoor with Vinnie Vines by his side, along with Jim Ledford and Janet Bernard, and of course the now-retired Charlie Smith, who is not here today. Together, we have worked hard over the years to save and create many jobs and tackle numerous difficult issues. I m proud to also recognize folks like Eric DeJohn, Brian Sullivan, Rick Madal, and Bill Collins. Through challenging business environments, they have ultimately made tough decisions over the years decisions I believe have benefited their members and our employees in the long run. Over the years, I have interacted with many others on the negotiations team, who take very seriously the challenges of balancing business needs with their members needs. An example is Dana at Appliance Park, working to create new jobs at Louisville and Jake s unrelenting focus with customers at our overhaul shop in Strother. Ric, I m optimistic when I hear how you are working hard to address competitiveness issues at Lynn. For those of you who are here for the first time, welcome. You should be proud that your members trust you and your judgment for such a critical role in this vitally important national negotiations process. Many of you have known me for a long time. I hope you know I hold myself to high standards and will do my best to negotiate a fair and competitive job package. 2
I know from your history that I can expect the same from you. Having said that like many of our deals in the past, it will not be easy, so let s work together to make this happen. On the GE side, I m fortunate to have a great mix of team members, who bring unique sets of skills and experience to the bargaining table: John Burke is the Employee Relations Manager for our Aviation business and is responsible for all labor practices, globally, for the business. Although this is his first national negotiations, he brings 16 years of labor relations experience, much of that with the IUE/CWA. John also has been the lead negotiator for the business in numerous non-cbc contracts. Many of you likely know Paul Lalli. Paul is back at the IUE table for his fourth negotiations. He is recognized as a top labor and employment attorney. Many of you may have worked with him at the contract language sub-committee in 2003, 2007 and 2011. Paul is an expert on our labor contracts, and I m happy he is part of this team once again. Cara Hume is the HR Leader for Supply Chain in Power & Water. She is located in Schenectady. This is Cara s first national negotiations. She has 12 years of GE 3
experience, mostly in HR leadership roles. Cara understands what is needed to be successful in GE and the Power and Water business. Tarita Preston will be our note taker. Tarita is presently on our labor relations team in Fairfield and is a recent graduate of GE s Human Resources Leadership Program. She started her career in the Appliance and Lighting business and has worked extensively on projects in preparation for these negotiations. Also seated in the room are many of the benefit experts and support personal that you have worked with in the past. They bring years of GE service and great knowledge to the table. Our team looks forward to working with you, the IUE/CWA negotiations committee and the other members of the CBC delegation over the coming weeks. Bob, you and many of your team members have been through this process numerous times. As I prepared for this round of negotiations, through discussions with you and many union leaders, there was certainly a common theme about concerns with the contract that we negotiated in 2011. Let me remind us all of a few positive points about the 2011 contract: 1) Wage growth of 10.5%, which has far exceeded the national inflation average of 3.5%, in addition to a large accelerated cash payment at the beginning of the agreement. 4
2) IUE Membership growth of nearly 18% over the contract period, which translates to thousands of new hires since 2011. Locations like Appliance Park, Salem, Schenectady, Bucyrus, and others all have increased headcount or have seen significant investment at their locations. 3) All these new hires received a job package that includes: Pay that is competitive and above average for the market. A benefits plan that is very comprehensive, offering high-quality healthcare coverage, and an outstanding retirement savings account. Many forget the improved paid-time-off schedule for lower service employees, and a vast array of other updated benefits that are matched by few in the industries in which we compete. 4) Also in the 2011 contract, I d like to remind all of the pension increases, which are often taken for granted, the early retirement window, and the large bonus offered to retirement eligible employee to retire in a separate window. 5) At the end of the day, I think most of us ask ourselves the simple question am I better off after the negotiations than I was before? I believe that the overwhelming answer from the majority of our employees, your members, is yes to that question. Even after increases in healthcare cost share, our 5
employees are clearly well ahead after the pay increases and other benefits enhancements. As we discuss the topics for this contract, I think many will be very traditional and familiar. We will again discuss active healthcare and retirement income plans, including the pension plan and retirement saving plan. We will certainly discuss wages, job and income security, life insurances and other areas we all care a lot about, including retiree healthcare for those active employees who could retire under this next contract. So, let s start with active healthcare. Over the last four years, we have heard a lot of feedback about the new consumer-driven healthcare plan. Comments concerning both cost and complexity have been major concerns for you, your negotiations team and maybe some of your members. Healthcare costs in the U.S. have increased significantly and experts predict these costs will continue to increase 6% per year through 2020. In addition, with the implementation of the Affordable Care Act in 2010, coverage mandates were increased in many areas, therefore driving the cost of insurance up for those companies that provide it to employees. The rising cost of healthcare in the U.S. is a topic covered in the media nearly daily, and I think we all realize we can t solve all the issues here, but I 6
believe it is critical we take a few minutes to look at the big picture when we talk about healthcare provided by GE. I know it is normal to feel that we pay too much there has certainly been focus on the 24% cost share target we agreed to in 2011 or that some think the new claims submission process is too complicated, but let s look at some of the facts about our plan: 1) First and most important, the providers in our networks are top-rated. Our employees have access to top doctors, top hospitals and top quality care in the U.S. 2) Employees who use the network see considerable discounts for the services provided because of our negotiated plans. 3) Our contribution structure is unique; employees who make less, pay less. 4) We have a generous dental and vision benefit plan included that is sometimes taken for granted. 5) When our plan cost and design is compared to most benchmarked plans for similar-sized industrial companies and/or companies against which we compete, our plan typically has a much lower total cost to employees and especially for pre-65 retirees. Most companies have moved to a 70/30 cost 7
share, and although we have discussed this level for at least the last three contracts, we sit at a level far below that and one that is very reasonable. 6) Our plan protects employees and their families financially from catastrophic illness expenses by providing out of pocket maximums. 7) When you think that you pay too much or that it is too complicated, I would like you to ask the union families that were unfortunately faced with serious illness or injuries about the cost covered by GE. While we don t know names given privacy laws, we know of certain general situations. For example, we know of one family who had more than $1 million worth of claims related to cancer diagnosis and treatment, and another example of over $700,000 for cancer treatments as well. We covered a family that faced more than a half of million dollars in hospital bills, and a family whose baby required a long hospital stay that cost well over a quarter of a million dollars. The vast majority of these expenses were all covered by GE. 8) We had just under 600 unionized production employees who had more than $50,000 in annual claims each. Ask those families about cost share or complexity. 8
9) As someone that recently had some surgery I m grateful to know that I can go to the Cleveland Clinic and be treated by top doctors at one of the top hospitals in the U.S. and I m thankful for the GE coverage I have. I believe our plan works just like insurance should it supports folks who have some claims, and it really kicks in as mentioned when employees and their families need it the most - in catastrophic healthcare situations that could otherwise bankrupt GE families. As I have stated in past negotiations openings, people will go out of their way to avoid using their car and home insurance for fears that their premiums will increase, but when it comes to healthcare insurance, it feels like people want to use as much of it as possible. Unfortunately, the perception for many years was that healthcare benefits are free, but in reality, they are costly for GE and, therefore, directly impact the company s ability to compete. It has always been GE s position to provide great healthcare coverage for employees, but the company wants people to use this benefit wisely and efficiently. And that won t change. Over the next few weeks, I m sure we will have impassioned discussions about our healthcare plan, but as healthcare costs continue to rise, you can expect to see proposals from us that continue to address cost sharing. We welcome your ideas on addressing cost and complexity, and we certainly have some ideas to share with you. 9
But there can be no doubt we believe the consumer-driven model, where employees are given the responsibility for their choices, is critical in keeping costs down for all of us. We crossed that bridge together four years ago and there is no turning back. When it comes to retirement plans, I have a few thoughts. First, let s talk about pension. Many of you in this room can likely remember when the pension plan was overfunded by $26 billion. As you know, that has changed. However, we are still fortunate to have a well-funded plan. Our plan is already situated to deliver replacement income that is in line with what most experts recommend. Low interest rates, greater life expectancies, and the changing rules governing plan funding make every dollar of improvements that much more expensive. It is important that everyone understands that, given the huge pension obligations to our employees, it is critical for us all to have realistic views about what is likely and possible in this area. Implemented in 2012, our Retirement Savings Plan RSP for new hires features enhanced company-matching and contributions. The Company Retirement Contribution (CRC) and the additional CRC has made this a top plan in industry. This is a great plan, and we need to make sure all employees your members get the full benefit of this plan by maximizing their participation and starting their savings early in their careers. 10
This is a case where those not participating to the maximum allowed are truly throwing away free money from the company by not getting the company match. We have some ideas to address this, and I fully expect you to bring many ideas and proposals to the Company in this area. Every week or two our employees are reminded about our wage package when they receive their paychecks. I think some of us who have been with GE a long time are a bit sheltered from the knowledge of what the true typical wages are in our communities and in the industries in which we compete. Our employees work hard, and they deserve good wages wages that are above the median for the type of work they do, but not at some of the levels they have grown to today. The challenging reality we face is that in some locations, our wage rates are out of whack with what we should be paying, therefore, putting employees and the businesses they support in a serious competitive disadvantage. In some cases, we are paying almost double the fair market rate. I applaud the IUE/CWA for taking the competitiveness issue head on at many sites through the local negotiating process, which in some instances, has resulted in the ability to add new employees at multiple locations. I understand wages will be an important topic in these negotiations. How we balance any increases that may be given between the various pay levels, I believe, will be critical. I know of companies with 11
similar concerns that have used lump sums and or fixed amounts versus percentage increases to keep wage inflation in line. As mentioned earlier, our employees have seen, on average, 10.5% wage growth this last contract plus the large accelerated cash payment. I look forward to your creative ideas on how to distribute effectively and fairly any increases included in the overall package. Growing up in GE Lighting and working with Appliances over the years, I think I understand the Job & Income Security issues. Each week, employees in those businesses could look at their local paper s sale inserts to see the price of our products compared against the competition. They could walk into the local stores and check to see if GE products were on the shelf or if the store was carrying and promoting a competitor s product. For a variety of reasons, oftentimes, GE products were not the winners. Please believe me when I say that I know how important job security is to you and your members. Ultimately, job security is not given, it is earned through competitiveness. We must offer products that have great value, high quality and top-of-the-line customer service. These are the attributes that provide us the best chance of job security. We have tried many 12
creative ideas over the years some have worked well and others have had limited success but the key was working together. As you know, each GE business, individually within its industry and markets, must be positioned to win profitable orders against its competitors to ensure long-term success. We have invited operating managers from several different business units where your members work to address this group for a better understanding of the challenges they face when competing for orders, investment dollars and growth, which ultimately leads to improved job security. Over the years, we have continued to update and improve our Job & Income Security language. I m sure you have some suggestions for further changes, as do we. I do want to make it clear, as I think we all have learned, that having overly generous job-loss packages that encourage people to leave, like our SERO benefit and SERO windows, may have increased job losses versus preventing them. These benefits are very expensive -- hundreds of thousands of dollars each -- and I don t think they work for either side any longer, so I believe we need to look closely and critically at all of these types of benefits programs. 13
Finally, there has been a lot of talk regarding the recent changes made by GE to its salaried Post-65 retiree healthcare and life insurance benefits. Although what will be relevant for discussion at this table will be any retiree healthcare changes for those represented employees retiring under the next contract, I would like to briefly discuss those salaried changes here. The costs and liabilities of post-65 retiree healthcare plans and retiree life insurance ultimately impact the bottom line of each of our businesses. There has certainly been some confusion and concern about these changes, but let me try to explain and clarify what the changes are. First, Medicare was and will continue to be the primary source of healthcare coverage for retirees age 65 and beyond. There is no change to this. What we announced was that the GE Medicare prescription drug and supplemental plans would no longer be available to salaried post-65 retirees. A revised benefits package was provided to eligible retirees instead. A number of the post-65 retiree health plans GE offered were employee pay-all plans; meaning the retirees always bore the full cost of the plans. In reality, similar or better replacement plans are available for purchase through many 14
insurers at a similar or lower cost than GE provided due to the purchasing power of 40 million post-65 healthcare participants versus GE s much smaller population. We believe that when coupled with OneExchange the service contracted by GE to help individuals choose the right plan for their particular healthcare needs these plans can provide retirees the type of coverage they need at an affordable cost. On the life insurance side, GE is one of the few employers to offer this type and level of benefit. You can expect to see proposals on these topics relating to representedemployees who could retire during this next contract period. After listening to your opening comments, and having worked with you and the IUE/CWA for many years, I understand and appreciate your perspective, your passion, and your commitment to your members. I have a few final comments. I recall an article not long ago in the Albany Business Review titled New Union Thinking Wins Back GE Jobs. It was about IUE/CWA Local 301 and the changes they were willing to make in order to help grow the business and create new jobs locally. I think we must keep this important thought in mind for the next three weeks. I expect we will have challenging discussions with a lot of intense dialogue. I believe we will be 15
successful if we can partner and use this New Union Thinking throughout these discussions to produce an overall package that will allow our businesses to compete in a global marketplace and reward our employees, your members, fairly for their important work. I fully anticipate that at the end of these negotiations, we will offer 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. We are proud of the jobs we offer and I think we would all agree that GE jobs are and will continue to be among the best and most highly sought after manufacturing jobs in the community. We continue to attract the right candidates, often getting hundreds or thousands of resumes for job openings. We have a lot of work to do in the weeks ahead. Knowing you and your team, I m sure you have come prepared with many ideas and proposals. I look forward to the spirited debates, and ultimately, I m confident we will find a way, once again as we have for many decades, to negotiate another fair and competitive contract between GE and the IUE/CWA. 16
I look forward to shaking hands again on June 21 st on a deal for which we can 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. 17