GE's first high-efficiency washer being produced at Appliance Park (SAVE FOR ACT)

LOUISVILLE, Ky. (WDRB) – GE Appliances says the wages of about 4,000 union-represented production workers at Louisville’s Appliance Park are too high to be competitive in the low-margin appliance business.

Meanwhile, the cost of company-provided healthcare for rank-and-file workers is growing too fast and “legacy work practices” regarding overtime and seniority are detracting from the plant’s efficiency, according to the company.

The statements come on the eve of negotiations for a new labor contract with the IUE-CWA Local 83761, which represents production workers at Appliance Park.

“We need to negotiate a contract that we can afford,” Eric Leef, the chief negotiator for GE Appliances, said in an employee newsletter circulated this week. “I see this contract negotiation as a pivotal point for Appliance Park’s future.” (A copy of the newsletter is below this story.)

Dana Crittendon, president of IUE-CWA Local 761, said in an interview Friday that the union hall has received “hundreds” of calls from members. He called the comments about wages and benefits “offensive.”

The negotiations will start on Monday and last seven to eight weeks, according to GE Appliances.

Last year, General Electric Co. reached a four-year contract with unions representing workers at plants around the country, including Appliance Park.

But China's Qingdao Haier Co., which bought GE Appliances for $5.6 billion in June, now gets to establish its own contract covering pay, benefits, work practices and other matters at Appliance Park.

With the planned closing of the Bloomington, Indiana, refrigerator plant, Appliance Park becomes the only GE Appliances factory with a union workforce.

While under the GE umbrella, the Appliance Park contract was negotiated in tandem with a collection of unions representing workers at all GE factories in the United States.

The Louisville workers benefited from the leverage of other unions at GE plants making things like locomotive and airplane engines, and have never negotiated a standalone deal with management, Crittendon said.

“It will be the toughest contract ever,” he said.

The negotiation comes on the heels of a business turnaround at Appliance Park, which struggled to survive during the recession that started in late 2007.

According to figures that were released in January when the Haier sale was announced, the GE Appliance business earned about $658 million in 2015 before financial expenses like interest and depreciation. 

That was a significant improvement from 2014, when the business earned $400 million on $5.9 billion in revenue, according to figures Haier disclosed.

But while some products made at Appliance Park are profitable, the Louisville operation -- on the whole -- does not turn a profit, GE Appliances spokeswoman Kim Freeman said in an interview Friday.

“We do have other profitable facilities and products, so we do need to get Appliance Park more in line with our other facilities, and more in line with the industry,” Freeman said. 

Appliance Park is the biggest manufacturing operation in GE Appliances.

Besides the Bloomington plant, which is closing, GE Appliances also has a refrigerator factory in Decatur, Alabama; a cooking products factory in Lafayette, Georgia and a refrigerator factory in Selma, Tennessee. GE Appliances also has a stake in the Mexican appliance manufacturer Mabe.

Freeman said GE Appliances' profits are generated by the non-union plants and the "sourcing" of products made by other manufacturers.

Freeman declined to disclose how much Appliance Park loses or its margins.

Crittendon didn’t dispute GE Appliances’ claim about profitability, but he said the union wants to examine the financials of Appliance Park.

“There’s a lot of areas that we know that the business can make, to save a lot of money,” he said. “As a union we are willing to explore those ideas with the company to get us where we need to be.”

Wages for entry-level factory workers at Appliance Park currently start at $15.51 per hour, and workers are immediately entitled to what Freeman called a “very competitive benefit package.”

“When you look at the appliance industry, that’s above average,” Freeman said.

She declined to say what starting wage the company would consider competitive.

The average hourly wage of manufacturing production employees in the Louisville-Southern Indiana metro area was $21.60 as of June, according to the U.S. Bureau of Labor Statistics. 

The IUE-CWA has already made several concessions that helped the appliance division get through the recession, including lowering the starting wage to about $13 an hour at one point.

Those moves helped GE invest more than $1 billion in upgrades at Appliance Park since 2010, bringing about 3,000 new rank-and-file jobs and some new products.

Crittendon said the union now has three tiers of wages as the company has demanded lower starting rates for new employees, meaning there are significant pay disparities between workers doing the same jobs.

Appliance Park wages generally range from $15 per hour to about $30 an hour for skilled tradespeople.

Crittendon said there isn’t room to add a fourth tier of lower wages for entry-level workers, as the pay won’t be high enough to retain experienced employees.

“You’re going to continue to have a revolving door, and it hurts the business… You have to spend money on training people,” he said.

Meanwhile, GE Appliances also wants to do away with some perks that Freeman said have been around so long that they are part of the “culture” of the union workforce.

For example, workers have “bump” rights that allow more senior employees to displace less senior employees if the more senior worker wants the less senior worker’s position. That often creates a cascading turnover in jobs, sacrificing time and efficiency as workers get up to speed on a different assignment, Freeman said.

The union contract also specifies that workers start earning overtime pay after 8 hours in a day instead of the typical 40 hours in a week, Freeman said.