Workers at General Electric’s Appliance Park in Louisville.

Union leaders say they expect a close result Tuesday, when about 4,000 eligible GE Appliances workers vote on a new contract proposal that would keep wages for current employees steady — but would lower starting wages for new employees by 23 percent.

Members of IUE-CWA 83761 were reluctant to talk Monday afternoon at the union hall on Poplar Level Road, but the general consensus among staff, members and union leaders was that the proposed contract would be approved or rejected by a narrow margin.

Members will vote on the proposal between 6 a.m. and 6 p.m. Tuesday at the hall. Many will be bused in from Appliance Park, which is about two miles away. Results are expected shortly after 6.

The proposed contract would freeze wages for current employees and pay them $5,500 combined in January of each of the next three years. Starting wages for new employees would drop to $12, from $15.52. Employees also would see higher shares of health care costs. The company would invest $90 million in Appliance Park next year.

Dana Crittenden, president of the local union, said Monday that many younger workers had not received a raise in years and would much prefer a raise over continued lump sum payments at the beginning of the year. Meanwhile, older workers dislike some changes to a work practice that fills job openings automatically by seniority, rather than based on skill and experience. The contract proposal calls for employees to have to bid on job openings, with a management team selecting who gets the job.

China-based appliance maker Qingdao Haier bought GEA in June for $5.4 billion from General Electric. The parties have been negotiating on a new contract since mid-August.

The company has said that Appliance Park is the only one of of its four sites that does not produce a profit, and the proposed contract would give GEA a path toward profitability. Union leaders have said the contract would allow the workers to achieve much of what they could hope for in tough negotiations with a new owner. Union leaders also said that not having the clout of other General Electric workers behind them has weakened the local union’s negotiating position.

Expertise vs. competitiveness

Beth Davis-Sramek

A University of Louisville professor told IL that the two parties reached a preliminary agreement is good news for Louisville.

Beth Davis-Sramek, associate professor and Dean’s Research Scholar at the University of Louisville’s College of Business, said that given the industry’s narrow margins; the loss of the corporate parent, General Electric; and significant concerns on each side before negotiations began, she worried about whether the sides would reach a deal.

She said industry dynamics are forcing the company to lower wages for future employees to return the park to profitability.

“It’s a low-margin, high-volume commodity business,” she said. Without the support from General Electric’s higher-margin business units, GE Appliances has to lower its cost to compete with other appliance makers.

With a $20,000 early retirement package, for which about 20 percent of the employees are eligible, GEA hopes to replace some older, more expensive workers, with younger, less expensive workers.

But, Davis-Sramek said, with a starting wage at $12 per hour — rather than $15.52 — GEA also has to accept that it can no longer compete for workers with Ford Motor Co. and other local higher-margin manufacturers.

When Ford is hiring, GEA can expect to lose some workers to the automaker, Davis-Sramek said. Union leaders told IL Monday that already had been happening.

The professor said that while GEA is competing primarily in a low-margin, low cost industry, the company has to push for Appliance Park’s profitability in part because it needs the cash to compete at the high-end of appliance goods.

When consumers go to Lowe’s or Home Depot, they see fancy appliances from GEA’s competitors that offer bluetooth connectivity and play music and Netflix, she said. Some new refrigerators have an internal camera that allows their owners to peek inside the appliance via their smartphone when they’re at the grocery store as they’re trying to remember whether they need milk.

Samsung’s Family Hub refrigerator.

Manufacturers sell fewer of those high-end models, but they raise a brand’s prestige. They’re akin to mass market automakers producing one high-end model — think Ford’s GT — to avoid the low-cost label and to get people talking.

“You have to be able to compete in that space as well,” Davis-Sramek said. “It’s part of managing your brand.”

With lower wages, GE Appliances will have to work hard to keep talented employees, the professor said, in part by creating an internal culture in which they feel valued and where their work ethic is appreciated, which will be difficult in the post-negotiation phase.

“Trying to move away from that ‘us vs. them’ mentality is going to be really important,” she said.

Possible outcomes

Kim Freeman, the company’s spokeswoman, told IL that the proposal would put wages more in line with the industry. She described the vote in some dire language, saying that the workers were voting not just on a new contract, but “potentially the future of Appliance Park.”

Crittenden, the union president, said that if the members rejected the proposal Tuesday, he would push for continued negotiations. However, he said, the company could say that the current proposal is its best and last, which could pave the way for a strike.

That harbors risks for each side, as it would mean interrupted production and possible reputational damage for the company — but it also could prompt the Chinese owners to push for moving production of at least some products out of Appliance Park, which would mean fewer jobs in Louisville and a further weakening of the union.