On list of GE’s big issues, don’t forget labor unrest

A Boeing 737 MAX 8 on the assembly line in Boeing’s Renton, Wash., plant. GE helps make engines for the plane.
A Boeing 737 MAX 8 on the assembly line in Boeing’s Renton, Wash., plant. GE helps make engines for the plane.Ted S. Warren/Associated Press/File 2019/Associated Press

On Wednesday morning, General Electric’s chief executive, Larry Culp, rattled off a variety of issues that could get in the way of the Boston company’s long-awaited turnaround: trade and tariff problems, its still-struggling power business, the grounding of the Boeing 737 MAX jets.

Culp needs to find a new chief financial officer, too, now that Jamie Miller is leaving.

But here’s one potential obstacle that Culp didn’t mention to investors during his quarterly earnings call: labor unrest.

It’s safe to say contract negotiations for GE’s 6,600 unionized workers in the United States have not gone according to plan. In June, GE and national union leaders had reached a tentative four-year agreement that would cover those employees.


But then things went awry.

The IUE-CWA, the union that represents most of GE’s unionized workers, failed to approve the contract terms. About 53 percent of the members voted in favor, but it wasn’t enough. Because a majority of members at two locations — GE Aviation in Lynn and GE Power in Schenectady, N.Y. — voted against the plan, union rules required all of the votes from those two locals to be counted against the contract.

GE hit another snag this week:

Members of the International Association of Machinists and Aerospace Workers overwhelmingly rejected the contract at several aviation and medical plants in Ohio and Wisconsin.

The IAM represents some 1,250 workers at those plants.

To make matters worse for management, the IAM informed GE that its members would go on strike Aug. 12 if they don’t reach a contract agreement.

Their complaints are similar to those raised in Lynn and Schenectady. IAM general vice president Brian Bryant says members are upset about health care costs: GE’s contract would freeze health insurance increases in the first year, but then cause them to go up 5.9 percent in each of the following three years.


And they aren’t happy with GE’s plan to significantly reduce the opportunities for double-time pay, potentially taking away thousands of dollars from members’ annual earnings.

Bryant says they also aren’t pleased about the wage increases in the contract: three pay hikes totaling an extra $1.80 an hour, and three one-time payments totaling $4,500.

The union recognizes GE’s financial struggles. But Bryant says the members work at GE’s most successful divisions, aviation and health care, and should share in that success.

So how is Culp doing with the turnaround since he became chief executive in October?

Wednesday’s second-quarter earnings announcement represents a bit of a mixed grade. Bears seized on GE’s disclosure that the grounding of the 737 MAX could cost it up to $1.4 billion this year. But bulls pointed to GE’s improved profit forecasts, including the possibility that GE’s cash flow from industrial operations could actually end up positive for the year.

Nick Heymann, a William Blair & Co. analyst, remains bullish. Engine orders for the Boeing jets will come through eventually. He says the departure of Miller, the CFO, could be a good sign, an indication Culp is convinced GE’s notorious accounting problems are in the rearview mirror. (Several analysts had expected Culp would eventually appoint his own CFO.)

The labor dispute? Heymann is counting on a relatively quick resolution.

It remains possible. A GE spokesman says the company continues to believe the proposed contract provides for solid wage increases and improved benefits while keeping GE’s businesses competitive, and notes that it has been ratified by several unions already. He says the company has contingency plans to ensure it can continue to serve its customers.


GE was originally set to resume negotiations with the IUE-CWA on Aug. 12. After the machinists’ strike notice, those talks were moved to Sunday.

Bryant also offered a positive sign at the end of the day Wednesday, saying his union, too, would go back to the negotiating table on Sunday.

Can GE’s negotiators get the contract talks back on track?

Culp, in all likelihood, is hoping so. If the issue isn’t resolved soon, he might need to add it to his already sizable checklist.

Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.