Job creator or job destroyer?

April 11, 2011

Zach Zill looks at the controversy surrounding Barack Obama's anti-union adviser.

WHY HAS Barack Obama picked a tax-dodging, union-busting, job-killing CEO as one of his top economic advisers?

General Electric CEO Jeff Immelt, who chairs Obama's Council on Jobs and Competitiveness, has come under scrutiny in recent weeks after the New York Times published a front-page article detailing how his company, which made $14.2 billion in profits last year, chronically avoids paying taxes.

But while the White House may hope to sweep the damage from that revelation under the rug, there are even more embarrassing facts about GE and Immelt.

Labor activists say that the company, rather than creating jobs, has actually closed over two dozen plants and laid off thousands of workers since Barack Obama's election in 2008. And the company is expected to push for major concessions in its upcoming national contract negotiations with its unionized workforce.

These attacks come despite GE's huge profits, a compensation package for Immelt of more than $21 million, and a $15 million movie and p.r. campaign celebrating the 100th anniversary of Ronald Reagan's birth. (Reagan made his transition from B-movie Hollywood actor to front man for the Republican right thanks in large part to GE, which hired him as a spokesperson in the 1950s.)

General Electric CEO Jeffrey Immelt with President Obama
General Electric CEO Jeffrey Immelt with President Obama (White House)

When the Times reported that not only did GE pay nothing in taxes in 2010, but claimed $3.2 billion in tax credits, critics rightly asked how such a huge, profitable company could get away with it. Nevertheless, Obama has defended his appointment of Immelt, and the GE boss justified his company's tax dodging. Immelt also claimed that GE will create 16,000 new US jobs this year and next.

But according to Chris Townsend, political action director of United Electrical Workers (UE), which represents thousands of GE workers, "the facts just don't square with what GE's public relations team is saying." Townsend cites a list he has compiled of over two dozen U.S. manufacturing facilities that GE has closed, or has announced it will close, in the two years since Obama came into office.

According to Townsend, these plant closures eliminated upwards of 3,000 jobs in states like New Mexico, Kentucky, Florida and Massachusetts. About two-thirds of the plants employed unionized workers. Fourteen different unions represent GE workers, including UE, International Union of Electrical Workers-Communications Workers of America, United Auto Workers, International Brotherhood of Electrical Workers and International Association of Machinists.

In fact, both the company's own reports to shareholders and its Form 10-Ks sent to the Security and Exchange Commission, obtained by union sources, confirm Townsend's claims. They show GE's workforce in the U.S. steadily shrinking in recent years, down from roughly 165,000 in 2004 to only 133,000 last year. During that time, the number of GE workers represented by unions had dropped dramatically, from close to 25,000 in 2004 to only 15,000 in 2010.

When asked about Immelt's claim to be creating 16,000 new jobs, Townsend replied, "There's absolutely no evidence that more than a few hundred exist. They're nothing more than projections...The only thing more dubious than GE's claims are its promises."

IMMELT AND GE have made it clear they won't be making any new promises to the company's existing union workforce when contract negotiations begin in May. The company is hoping to use the bad economy as an excuse, and mimic the precedent set by other profitable companies like Mott's, which have cut workers' compensation in recent years even as earnings increased.

The unions representing GE workers, including UE, believe that attacks on GE workers will come in three main areas: health care benefits, retirement benefits and wages. In fact, GE has telegraphed what it will seek from its union workforce by already forcing through significant cuts in the benefits of its nonunion employees.

A year ago, the company forced nonunion salaried workers into a new Health Choice plan--a high-deductible health care plan that replaced two other company plans. According to UE's website, Health Choice provides inferior coverage to workers at a much lower cost to the company. Ominously, Immelt has stated that GE will have only one health care plan for all its workers--meaning the company will try to eliminate older, better plans for its union workforce as well.

As for cuts in retirement benefits, GE disallowed newly hired salaried employees from participating in the GE pension plan as of January 1 of this year. This attack comes despite the fact that the GE pension fund is in such good financial shape that the company hasn't had to pay into it at all since 1987.

According to a resolution passed by UE's GE Conference Board, cutting off new workers from the pension plan "has nothing to do with the health of the pension plan or the company, but is rather an effort to realize big and immediate accounting gains in the balance sheet in an effort to pump up the stock price."

Finally, the suspicion that GE will seek wage cuts derives from the company's recent threats at several plants to close down unless workers took concessions and adopted a two-tier wage structure.

These attempts to squeeze workers have nothing to do with the GE's financial health. Though the company did take a hit as a result of the Great Recession, it continued to rake in billions, and last year, profits started to climb again. Immelt's own compensation doubled from 2009 to 2010.

In a recent shareholder letter, Immelt writes in glowing terms: "In 2010...our earnings expanded by 15 percent...We raised the dividend twice, for a combined 40 percent increase. Our stock price responded well, up 21 percent for the year...I have never been more optimistic than I am today."

As Townsend remarked, "Any CEO in any company in the U.S. would have a hard time not trading with GE's balance sheet at this point. It's pretty phenomenal from a business point of view." Immelt revealed late last year that the company would be sitting on $25 billion in cash reserves by year's end. The company's vice chairman, John Rice, said that "we're looking at smart, responsible ways to use the cash."

Paying better wages and benefits to its workers certainly does not seem to be one of those ways. On the contrary, Immelt's shareholder letter claims that "maintaining an attractive dividend is the top priority." On top of that, GE bought $1.6 billion in credit card debt from Citigroup--broadening GE's reach in the debt collection business.

IT'S HARD to prettify GE's anti-worker record. So why did Obama make Immelt a top adviser? As Republican governors attack public-sector unions across the country, Obama has tried to project an "above-the-fray" image and appear generally sympathetic with the plight of workers.

But a closer look shows that Obama's embrace of Immelt is in keeping with the president's economic policy. As UE's Townsend put it, putting Immelt in charge of creating jobs may be "absolutely preposterous," but Immelt has sat on the President's Economic Recovery Advisory Board since 2009. And Obama called the anti-labor GE a "model" for American companies--a clear indicator of his economic agenda.

Obama's selection of Immelt speaks volumes about the kind of politician the president really is. It also highlights the way in which the U.S. government inherently sides with employers when companies seek to squeeze more profits out of workers.

But if GE is a symbol of U.S. corporations' greed, tax-dodging and corrosive political influence, it can also become a symbol of resistance to all of these things. GE's unions are gearing up for a fight, and working people around the country are beginning to call for Immelt to resign or be fired by Obama.

The unions representing GE workers have a Coordinated Bargaining Committee that negotiates one unified national contract for all union workers, and they have a history of solidarity and strike action to back up negotiations. The unions have already held rallies at plants around the country and are planning a national rally on June 4 in Erie, Pa.

Forcing GE's--and Obama's--hand will take a concerted effort from GE workers and their supporters. Certainly, getting GE to back down would be an important victory for workers everywhere. And pressuring Obama to fire Immelt would send a strong message to Corporate America that their endless attempts to fleece U.S. workers and taxpayers will be met with strong resistance.

Further Reading

From the archives