GE Accused Of Defaulting On Promises
New York — Ten years ago, Dennis Rocheleau sat across the bargaining table from General Electric Co.’s unions, pushing health care cuts so deep they led to the first nationwide strike at the company in three decades.
Now the former chief labor negotiator is railing against management, seeking to restore access to retiree health coverage that thousands of current and former employees will lose in 2015. He publicly confronted Chief Executive Officer Jeffrey Immelt at the annual meeting in April, saying GE “defaulted on its obligations” and “turned its back on its traditions.”
“I always maintained that at GE, promises made were promises kept,” said Rocheleau, 71, who retired in 2004 and has taken advantage of his clout to lobby other top executives and the board. “What’s so difficult to deal with is that now it turns out that’s not always the case.”
Rocheleau is a rare voice for retirees as employers curtail coverage, a step that threatens to raise costs and curb choices for Americans who have left the workforce and have little power to fight back. IBM Corp. and Time Warner recently joined the benefits pullback with plans to move retirees to insurance exchanges.
“There has never been any real protection for retiree health benefits,” said Richard Kaplan, a University of Illinois law professor who has analyzed legal efforts to undo such cuts. “Companies have been able to say willy-nilly things have changed, this is what it’s going to be and you can take it or leave it.”
An array of GE offerings, which help supplement Medicare benefits and cover costs for needs such as hospital stays to prescription drugs, will be closed to new entrants on Jan. 1, 2015. Access to GE-provided life insurance also was restricted. Rocheleau estimates that the changes will end eligibility for about 50,000 retired GE workers, their spouses and dependents. Those affected are former salaried workers, not union members.
Rocheleau, who like current retirees age 65 and older won’t lose benefits, said in an interview that he was spurred to act because the pullback undercut the stances he took during years of bargaining as the face of GE on pay and benefits.
GE’s move places the Fairfield, Conn.-based company in the mainstream of corporate America. A survey last month of 400 large employers found that 44 percent of those with retiree coverage were weighing whether to end it by 2015, according to Towers Watson & Co., a New York-based benefits consultant that advises GE. The benefit to GE: saving $832 million in post-retirement benefit obligations.
“They’re saving millions of dollars and the people they’re taking it from are the ones who can afford it the least,” Rocheleau said.
Companies retreating on health coverage are shifting the administrative and financial burdens to workers, the government or other employers. That’s the case with United Parcel Service Inc., which said last month it will drop benefits for spouses eligible for coverage where they work.
GE has always reserved the right to amend its retiree plans at any time and for any reason, said Seth Martin, a spokesman.
“We continuously assess our benefit programs to strike a balance among employees, retirees, investors, and our ability to compete,” Martin said by e-mail. “The changes we made to our post-65 retiree health coverage are consistent with national trends in employer-sponsored retiree health plans.”
To help replace coverage, GE connected retirees to insurance brokers to help purchase insurance in the private market, according to a pamphlet distributed by the company to current and former employees.
That may be more expensive for some retirees, especially those in poor health or who live in high-cost areas, according to the pamphlet.
Rocheleau’s pivot to champion retirees follows a 36-year career at GE, including 13 as lead labor negotiator, a role in which he faced off with unions on behalf of the world’s largest maker of jet engines, diesel locomotives and medical scanners. He said he is considering approaching those same unions in his quest to reverse the cuts.
GE has “no idea how far I’ll go to fight this,” said Rocheleau, a Harvard Law School graduate who splits his time between homes in Wisconsin and in Connecticut near GE’s headquarters.
Lance Compa, a Cornell University labor professor who negotiated against Rocheleau as a union official with the United Electrical, Radio and Machine Workers of America, said his onetime bargaining opponent was “always very professional, very direct and very honest.”
“Even though we were on opposite sides of the table and adversaries in the labor-management context, I always had a very high regard for him,” Compa said by telephone.
That respect didn’t prevent unions representing more than 17,000 employees across 23 states from walking off the job in January 2003 over GE’s attempt to shift more of its rising health costs to workers. GE’s last previous nationwide strike was a 14-week work stoppage that ended in February 1970.
While some companies say the Affordable Care Act is boosting expenses and forcing them to cut back, dwindling retiree coverage long predates that 2010 law. The proportion of covered ex-employees fell to 18 percent that year from 29 percent in 1997 and shows no sign of slowing, according to the nonpartisan Employee Benefit Research Institute in Washington.
Faced with rising benefit costs for retirees, Armonk, N.Y.-based IBM said Sept. 7 that its former employees will be moved to a health exchange run by Towers Watson. New York-based Time Warner said that its retired workers would also be moved to a private exchange.
That was more than 13 years after Honeywell International Inc. moved to restrict retiree medical and life-insurance coverage, halting benefits for nonunion hourly and salaried employees who joined the company after Jan. 1, 2000, according to a regulatory filing.
“Workers that have access to this benefit are either in grandfathered plans, in public-sector plans, and union plans,” said Paul Fronstin, a EBRI researcher who has studied retiree health-care practices. Federal retirees are among those shielded from the changes roiling the U.S. workforce. Their benefits are set by Congress.
While retiree health coverage lacks the legal protections enjoyed by pensions, Rocheleau does have an asset cultivated during decades at GE: access to corporate leaders.
In a face-to-face meeting this summer, he lobbied Brackett Denniston, GE’s general counsel, to roll back the cuts.
He sent an eight-page document to Rochelle Lazarus, former CEO of Olgivy & Mather Worldwide Inc. and chairman of the corporate governance committee of GE’s board, arguing that retirees feel GE “improperly stripped them of something of substantial value that they believed they earned over a career.”
“Without a comprehensive re-examination of this issue, I am dedicated to escalating it as much as I intellectually and financially can,” Rocheleau wrote.
The next step is to try to rally support for his position among the unions representing GE’s 17,600 organized U.S. workers, whose contract expires in 2015, Rocheleau wrote.
He made his case in front of investors at GE’s annual meeting in April in New Orleans. Speaking before dozens of fellow GE shareholders, Rocheleau admonished Immelt for not responding to a request to meet and discuss the cuts as the CEO looked on from the dais. The benefit changes amounted an “evisceration,” Rocheleau said.
Rocheleau had “a hell of a lot of credibility” with management and labor, said William Conaty, GE’s former head of human relations and Rocheleau’s superior when he retired.
“When something strikes Dennis the wrong way, you’re going to hear from him,” said Conaty, who is now an adviser at private-equity firm Clayton Dubilier & Rice. “He’s absolutely not afraid to say what’s on his mind.”