Downsizing of GE workforce was painful period

PHOTOGRAPHER: Courtesy miSci

GE employees walk out of the main campus Nov. 25, 1913.

Editor’s note: No corporate name is more synonymous with Schenectady than General Electric. The city’s nickname — the Electric City — is derived from GE, after all. But the Schenectady-GE symbiosis hasn’t always been rosy. In this week’s installment of our series on GE’s 125th anniversary, we take a look back at some of the dark days of downsizing.

SCHENECTADY — Friday afternoons during her eight years as mayor of Schenectady were never a lot of fun for Karen B. Johnson.

Between layoffs and retirements, the city’s major company, General Electric, was drastically reducing its workforce during Johnson’s two terms (1984-92) in the mayor’s chair. From 24,000 employees in 1980, the company’s workforce would dwindle to 12,500 by 1990. By 1995, more layoffs brought that number to 6,720. Johnson was usually sitting in her City Hall office on a Friday afternoon when a GE representative would stop by and share the bad news.

“They had a regular routine where they would go to the union and tell them what they had specifically planned, and then eventually they would come to the mayor’s office,” remembered Johnson. “They let us know so we’d be prepared in case the press asked us questions. The first wave of decreased employment might have been retirements. All those people who got jobs during World War II were retiring. But then we got into the layoffs, and then more layoffs.”

In 1986 and 1987 alone, GE eliminated 3,350 jobs. The company had been celebrating “100 Years of Edison in Schenectady,” but 100 years after America’s greatest inventor brought his machine works here in 1886, no one felt like celebrating.

“At a certain point, there was this feeling of inevitability about all the GE stuff,” said Johnson. “It was pretty discouraging. And over time, GE began taking a lot of tax-reduction actions against the city and Rotterdam. It got to the point when we realized that the city’s argument was not going to stand up in court. When you realize you’re not going to win, you better figure out what the next-best strategy is.”

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A strike at General Electric on Oct. 4, 1915. (Courtesy miSci)

Three years before Johnson became mayor, Jack Welch took over as chairman and CEO of GE, succeeding Reginald Jones. According to the company web site, GE.com, “During his 20 years of leadership in this position, Welch increased the value of the company from $13 billion to several hundred billion.” The Welch bio goes on, referring to him as “legendary,” and saying that he had “little time for bureaucracy and archaic business ways.”

Others might offer a different viewpoint. When Welch took over, GE was making products ranging from toasters to turbines. Much of that is gone, as are many of the workers, and with the focus of the company shifting away from research and manufacturing to finance, many former employees aren’t fond of their former boss, who retired in 2001.

“The work used to be rewarding. You had a friendly atmosphere, and you worked out of loyalty,” said Mary Kuykendall, who worked for the company for more than three decades in various marketing positions and as a speech writer. Kuykendall wrote and self-published a book about her experience — “Rebuilding the GE House Jack Welch Blew Down” — in 2015. “Then it felt like you had to become part of this dog-eat-dog world, and I could never buy into the Welch strategy of working out of fear and being so greedy.”

Welch’s approach was hard-edged. He didn’t hesitate to get rid of divisions that he felt were performing poorly, and his motto when he took over in 1981 was “Fix it, close it, or sell it.” In his 2003 memoir, “Straight From The Gut,” he didn’t dwell on the human costs of downsizing, trumpeting his idea of the “vitality curve,” which tells managers to identity their top 20 percent of performers, who are to be nurtured, and the 10 percent who are the least productive employees, to be dismissed.

Welch’s supporters argued that his housecleaning stripped away layers of bureaucracy that had built up over nearly a century of business, and that his commitment to competition created more value in GE’s stock.

Walt Robb, a chemical engineer who helped GE make great strides in the medical field and became director at GE Global Research, told The Daily Gazette earlier this year, regarding Welch, “I loved him. I thought he was absolutely the best CEO this company ever had.”

Dale Brown, a research physicist who spent more than three decades at GE Global Research, felt the impact when Welch took over. He didn’t like it.

“He wanted to sell everything — sell it all, and put it into financial services,” said Brown. “He didn’t understand silicon carbide, semiconductors or electronics because he was a chemical engineer. He liked plastics and financial services. He also took GE out of the military business, and I think that was a big mistake. Some of the best products GE ever made were inspired by the military contracts we had. Suddenly that was all gone.”

There were many new programs and slogans that came with the Welch reign. Divisions had to be first and second in their particular sector, or they were sold or discontinued. And a new way of doing things, called Six Sigma, seemed to be one of the least popular among GE employees.

Mark Markovitz, a chemist in the product development laboratory downtown back in the 1980s, had particular contempt for Six Sigma. Created by two Motorola engineers in 1986 as a set of tools and techniques for process improvement, Welch made Six Sigma a central part of GE’s workplace philosophy.

Pickets at the GE main gate. (Courtesy miSci)

“During this mania,” said Markovitz, “each and every CEO from each business described how great Six Sigma is and what it is doing for the business. It was obvious it took great effort to write this BS. Engineers and scientists were measured on how many Six Sigma projects they completed during the year. Engineers and scientists would successfully solve a problem using the efficient scientific process but would not receive credit for it because it had to be presented in the Six Sigma format.

“Sometimes additional unnecessary data would be collected to strengthen the Six Sigma report. Therefore, an incredible amount of valuable engineering time was wasted to present Six Sigma success stories that were already completed using the efficient scientific process.”

According to Markovitz, many engineers who didn’t buy into the Six Sigma philosophy — “managers who cared and knew about their business and resisted” — left the company or were forced out.

While many scientists and engineers and other white collar workers were disappointed in the decreased focus on research and manufacturing, it was the blue collar workers who really felt the brunt of the blow.

Carman DePoalo, a lifelong Schenectadian, started out as an electrician and later became closely involved with the union, eventually rising to the position of business agent for Local 301 IUE-AFL-CIO. Retired for five years now, DePoalo started at GE in 1970, when the downtown plant had 27,000 workers.

GE also moved some of its large workforce into the vacant American Locomotive Company plant on Maxon Road after that business left Schenectady in 1969. While those empty ALCO buildings looked good to GE vice-presidents looking for growth, by 1990 they were looking at their own empty buildings on the once-bristling downtown campus. And in 2004, the ALCO buildings used by GE were also vacant again.

“As far as I’m concerned, GE is one of the biggest anti-union companies out there,” said DePoalo. “I just missed the 1969 stike, but that was brutal. People went out for better wages, and that’s something GE just doesn’t give you.

“It just got so depressing and discouraging. And when you layoff 3,000 people, it affects 9,000. Families and other businesses are hurt, workers who kept their job suddenly have to start working second or third shift. It really changed lives.”

In 1980, GE’s workforce was at 24,000. By 1985 it had dipped to 15,000, and by 1990 it was at 12,500, it’s lowest number since 1900. And in 1994, when it was announced that another 1,000 workers would be laid off, DePoalo was a big part of the negotiations between the union and GE. A 24-hour strike was called. It ended when the third shift returned to work at 11 p.m. on August 31.

“GE would always open every negotiation with a statement saying how they truly did not want to deal with a third party, like a union,” remembered DePoalo. “I loved GE. It put a roof on all of our houses, and I argued how the company needs to survive. But then you look at the stock dividends and bonuses the big shots are getting, and they turned around and tell us how they had to layoff people.

“Sometimes I used to question, ‘do they really want to fail?’ They’re getting these huge packages, and meanwhile we’re getting laid off and losing our benefits.”

During the 1994 strike, David Genever-Watling, head of GE Industrial and Power Systems, said in a press release that the layoffs were necessary “in order to strengthen its competitive position.” In that same press release, Genever-Watling told his stockholders that the company anticipated “double-digit earnings growth.”

“Stockholders were getting good dividends, the Wall Street analysts loved Welch and his financial engineering, but to me he was destroying a lot of middle-class America,” said Kuykendall. “I would have liked to ask him and all of his vice-presidents to think a little longer and a little harder about what they were doing. They were so excited about squeezing every inch out of the business, they didn’t think about any long-range plan.”

Welch had a few missteps in his 20-year reign, including the purchase of the morally-bankrupt Kidder Peabody in 1994. But for the most part, he kept his stockholders immensely happy. His strategy and tactics took GE’s stock to its peak market capitalization in 2001, and while the stock decreased significantly under Jeff Immelt, it has rebounded to some degree.

Immelt, before resigning earlier this year, also pleased GE traditionalists by returning some of the company’s focus to things like research, renewable energy, aerospace, oil and gas, and healthcare. Between the main plant downtown and GE Global Research in Niskayuna, the company’s workforce has maintained between 6,000 and 7,000 employees for more than two decades.

Workers strike in Crescent Park in 1946. (Courtesy miSci)

“Welch bought other companies and harvested them, and I liked to say how it was always easier to harvest a garden than to grow one,” said Kuykendall. “I actually have sympathy for Jeff Immelt because all the things that Jack Welch did came home to roost, and it was Immelt that had to deal with them.”

Johnson, who decided not to run for a third term as mayor, bears no ill will toward any GE employee.

“I don’t hold a grudge,” she said. “They made decisions. Big corporations make decisions that they hope will make their long-term success more viable. I guess it’s up to us to sometimes convince them that we might be a part of that plan. Sometimes, that just seems impossible.”

Current mayor Gary McCarthy says that GE still plays a vital role in Schenectady, and he sees no reason why that won’t continue.

“They’re doing a bit of restructuring to maintain their global competitive position, and we not only want that for the company, we want to make sure the Schenectady facility is cost-effective in that business structure so that they can continue to generate work that’s going to be done here in Schenectady,” said McCarthy. “The wind turbines are managed here, and we want to continue to see the growth of alternative and renewable energy.

“I think the long-term future is bright for GE, and I think their relationship with the city of Schenectady is also bright.”