July/August 2001 - VOLUME 22 - NUMBER 7& 8
An Interview with John Hovis
John Hovis has been General President of the United Electrical, Radio and Machine Workers of America (UE) since 1987. He currently coordinates UEs national bargaining with GE. His first GE servicing experience came as a field organizer in 1973. From 1975 through 1980, he was active in organizing campaigns at GE plants in the southern United States. He serviced UEs largest GE shop the Erie GE Locomotive Works from 1980 to 1982. From 1984 to 1987, he served as UEs director of organization. He has been involved in organizing and negotiating with the General Electric Company for 28 year
dictates is that
every business should attempt
every job unless management
on its head.
Multinational Monitor: How many GE jobs have moved out of the United
States, and through what mechanisms?
I dont know if anyone has an exact fix on the numbers. We do know
that 40 percent of GEs revenue now comes from its international
GE is not necessarily building new plants in other countries; they buy
and sell companies both here and abroad like no other corporation I know
Chairman Jack Welch recently said that the company bought and sold over
100 companies last year alone. Thats fairly typical of the pace
at which GE buys and sells companies each year. Not all of those companies
are involved in manufacturing, but some are. So theres a constant
churning the companys word of businesses
within General Electric. The company has been particularly active in Japan
and Asia, taking advantage of the downturn in those economies to buy up
businesses at bargain prices. Moving jobs abroad is just one of the strategies
GE uses to boost its profits and consolidate its power around the world.
The companys tremendous cash assets allow it to move very rapidly
to accomplish large and small transactions alike. The 1986 RCA purchase,
the Tungsram Lighting plant in Hungary and the recent Honeywell acquisitions
are good examples. GE knows how to make use of its size. They see something
they want, they go after it. When they decide to sell something, they
sell it, regardless of the consequences for employees or the community.
Unfortunately, as Jack Welch admits and as Kidder, Peabody and other
acquisitions show, not all of the moves have proven to be home runs,
the term Welch uses. But when youre as big and rich as GE, you can
afford to make a few mistakes.
Aside from the moves to locations outside of the United States, an even
greater number of jobs are lost to a sharp increase in subcontracting.
Its easier for us to track those numbers. GE workers were hit hard
by plant closings in the 1980s the Neutron Jack
years. In the 1990s, the companys strategy has switched toward transfers
of work and subcontracting. GE uses a number of methods and terminology:
outsourcing, inside contracting, transfers of work, farming out and relocation.
They all amount to the same thing.
There was an article in the local paper in Erie, Pennsylvania which cited
company officials who said GE provides $160 million in business for more
than 140 companies within 100 miles, just for the Erie plant.
The company has been working for a number of years toward turning its
remaining large production plants into final assembly facilities. The
goal is to employ a limited number of higher skilled, higher paid, more
permanent workers supported by a more flexible semiskilled workforce that
is susceptible to regular layoffs. Subcontracting advances this strategy.
Additionally, subcontracting enhances GEs ability to dominate production:
GE has the ability to put a good deal of pressure on subcontractors to
hold down costs. We routinely hear that GE subcontractors have been ordered
to reduce costs by 3 to 7 percent or lose GE as a customer. They hold
all the cards, so its easier to bargain with contractors competing
for their work than it is to bargain for concessions from their own employees.
At one time in Erie, the company had subcontractors waiting at the construction
gates to get an opportunity to do work inside the plant mainly
maintenance work, painting, electrical and plumbing work
work formerly performed by GE employees.
One of Jack Welchs dictates is that every business should be attempting
to outsource every job unless management can justify keeping it in-house.
This turns everything on its head. It puts people in a position where
the work is going to be lost unless the company can figure out some way
to justify keeping it, as opposed to figuring out if sending the job out
is justified. GE has set up a whole internal structure of outsourcing
managers in the major divisions of the company. Managers justify their
position by subcontracting work, even if it leads to higher costs to the
company. Unionnegotiated Job Preservation Committees are just now verifying
that the inherent abuse in this policy has led to higher costs for GE
and the senseless loss of jobs for our members.
Constant speed up is another part of Welchs managerial strategy.
He refers to it as squeezing the juice out of the lemon. According
to Welch, theres always more to be squeezed out; the lemon never
runs dry. Like most executives, he prefers to use the more polite term
of increased productivity, but on the shop floor, its
In the early 1980s, at the locomotive plant in Erie, the company on average
shipped about 350 locomotives a year while employing about 7,500 hourly
workers. As a result of improved technology, speedup and subcontracting,
the Erie Locomotive plant last year produced 911 locomotives with about
4,000 hourly employees. GE workers are very productive, to say the least.
MM: To what extent does GE use the threat of job shifting to leverage
its position in contract negotiations?
GEs policies are so well known among the people who work for them
that the company does not have to make explicit threats. GE doesnt
come out and say, If you dont do what we demand, were
going to close this plant or move this work. They just say a plant
is under study or a certain job is being studied,
and that gives workers the signal that the company is prepared to move
the work and its just a matter of time before you may get notification
of a plant closing, a plant sale, or that work is being moved out.
Everyone knows Jack Welchs theory on getting things produced as
cheaply as possible anyplace in the world. Weve all heard his statement
about ideally having every plant on a barge.
The company tries to put the burden on the union: You tell us what
you are willing to do to save your jobs. GE wants to force the union
to come forward with concession proposals. The ongoing fight to defend
jobs at Appliance Park in Louisville, Kentucky (represented by the IUE-CWA)
and the Bloomington, Indiana refrigerator plant (represented by the IBEW)
are just two examples of situations where GE has used such tactics.
A company as restless as GE is always inventing new cost-cutting regimes.
For some time the theme was the Work-Out Program; then Total Quality Management
(TQM), and Best Practices, which involved borrowing ideas from other companies,
and Demand Flow Technology (DFT). These programs were aimed at developing
a boundaryless company with centers of excellence,
where all of the best ideas would come together for the good of all concerned.
Over the past 20 years, theres been one program or catch phrase
after another, all adding to a somewhat confusing and very stressful work
The latest program is Six Sigma, which aims at producing higher quality
to meet the customers needs. Every manager at GE must be a black
belt the martial arts language is part of the whole
Six Sigma scene in Six Sigma methods, and every division
has a Six Sigma project underway, even the human relations and the union
relations divisions of the company.
Regardless of how high their profits per employee go, GE is not shy about
demanding greater employee contributions in the areas of health and dental
insurance or other benefits the company can very easily afford to pay
for. The edict is to show continuous improvement their term
in controlling costs.
Despite GEs claims, Six Sigma is not really about maintaining the
companys bottom line in the competitive global economy. The fact
of the matter is that GE doesnt like to compete. Thats why
Jack Welch mandated that GE get out of businesses in which it wasnt
the first or second player. The company wants to set the rules and control
the playing field, and being number one or two allowed them to do both.
So Six Sigma and programs like it are really geared toward attempting
to sustain its continuous improvement not the least of which
is continuously improving stockholder expectations.
GE managers, many of whom have had their pay incentive packages tied
to stock performance, come to the bargaining table every three years with
demands for concessions, even after six years of double digit growth covering
the terms of the last two union contracts.
We know that the Jack Welch culture is deeply rooted in GE; each of the
newly appointed business leaders is a Welch devotee.
Thats not only true of GE the Welch culture can be
found in the many companies that former GE executives now head up. Robert
Nardelli at Home Depot and James McNerney at 3-M are the latest, but there
are several others, including Lawrence Bossidy, formerly of Allied Signal
and later Honeywell. All these CEOs have been weaned on Jack Welchs
principles and the drive to delight stockholders.
The IUE-CWA represents the largest number of GE workers; however, both
the IUE-CWA and UE maintain national agreements with GE. The other CBC
unions have master or local contracts.
By agreement and out of necessity, the CBC guidelines allow each union
to maintain its autonomy and independent positions, while presenting a
common front to the company. At times it can be a difficult task to accomplish,
but we work together pretty well.
We try hard to balance things out, while keeping in mind that its
still two national agreements that are being negotiated. When you put
14 different unions in one organization, they each have different mandates
from their members, so were each obligated to not only support our
own members proposals, but those of the other unions as well. We
have to set priorities. We communicate and cooperate with each other the
best we can, but clearly GE has benefitted from the 1949 CIO split
which is why the company actively helped to engineer that split.
GE negotiations today bear little resemblance to the pattern bargaining
done by the United Steel Workers (USWA) in the steel industry, or the
United Auto Workers (UAW) in the auto industry. There was a time when
GE workers were on equal footing with the workers in both industries in
wages and benefits, but theyre not quite there today. The split
has had a direct material impact on GE workers.
Im not convinced they have been as good for the employees or the
many communities where GE plants are located.
GE has divested some solid businesses that other companies seem to be
able to make a decent profit from. Black and Decker has done all right
with GEs small appliance business. Martin Marietta, now Lockheed-Martin,
may prove to be another example.
Jack Welch can be inspiring and he has shown exceptional leadership abilities.
He has proven he can move mountains, but that can be a double-edged sword.
Welch has had a tendency to become infatuated with any number of programs
that have been brought to his attention and I dont know that he
always takes the proper time to do the in-depth thinking or obtains the
kind of advice one should seek out before moving an entirecompany the
size of GE. Acting with speed and embracing change have been his mantra.
I dont know what problems the Honeywell merger or its failure will
present for GE, but for a mega deal of this size it came awfully fast,
and the company isnt prepared for it internally.
And while Welch professes to not want a bunch of yes men
around him, it appears that he in fact expects that from people. Clearly
there arent many people who have stood up to Jack Welch and challenged
him on his views. Theres not been an executive of Frank Doyles
stature and influence in the company since he retired several years ago.
Doyle was one of a rare breed who dared voice his opinion of Welchs
Beyond the businesses of course, are the communities in which GE operates.
I think GE has been very callous about any kind of commitment to the communities
they do business in. The RCA acquisition in 1986 is a good example. They
cleaned that whole company out. They kept NBC, but they destroyed RCA.
An awful lot of people lost their jobs. Some employees ended up being
involved in the trade-off to Thompson Electronics for the medical systems
GE gave up some of its appliance business for that. But an
awful lot of people either ended up losing wages and benefits or losing
their jobs altogether.
GE constantly beats the drums for decreases in public school taxes and
property taxes. I think thats really mean-spirited. And the companys
behavior around the ongoing battle to avoid the EPA-mandated clean up
of PCBs in the Hudson River has been perfectly shameful. Its a good
example of what happens when a corporation can rent or own
all the airtime it wants.
I believe Jack Welch is wrong when he says that loyalty is a misguided
sentiment in todays business world. That might be true for a corporate
CEO or company manager, I wouldnt know, but it doesnt apply
to people with civic and moral values. Loyalty is a virtue that should
not be limited to local sports teams.
Finally, there is GEs relationship with its workers. For all the
lip service paid to total involvement and building a boundaryless company,
GE managers pay little attention to the hourly employees, the very people
who get the job done. They pay attention to their shareholders, and when
they have to, to the needs of the customer, but managers rarely listen
to the ideas of their hourly workers.
GE accountants tend to view hourly employees as head count,
an expense that reduces company profits. They tend to view employees as
a liability rather than as the assets that they truly are.
In its more than 65 years, UE has devoted itself to the idea that the
ordinary and hardworking members of this (or any) society should not only
receive the material rewards necessary to lead dignified lives, but that
they should participate fully, as workers and as citizens, in decisions
about how industry and the wealth it generates should be invested.
Thats what we exist to accomplish. Our experience with GE has taught us that nothing could be more alien to the companys agenda.
culture can be found in many companies that former GE
head up. All of
these CEOs have been weaned on Jack Welchs
principles and the drive to delight
Thats why Jack Welch mandated
that GE get out
in which it
wasnt the first
or second player.
GE wants to
set the rules
the playing field;
being number one
or two allows
them to do both.
|GE has stripped down
manufacturing base by deskilling a
number of jobs
and subcontracting or moving the work out of the country.
... I dont know that such a policy is
in GEs, let alone
the countrys, best long-term interest.