(PRU0002)

Written evidence submitted by GE on 14 May 2019

 

Summary

 

  1.                      GE has listened to employees, unions and customers about the future of the Leicester Road site in Rugby over the past 17 months of consultation. There has been no rush to judgment.
  2.                      GE management is committed to finding a viable solution for the site.
  3.                      We face tough global markets. There are no easy answers, but GE is continuing to work with key stakeholders to find a way forward.
  4.                      We will take the necessary time to conclude these discussions before any final decisions are taken.
  5.                      GE is committed to the UK: 16,000 employees; with high value exports and a substantial UK supply chain.

 

Detail

 

Context

 

  1. GE is committed to the UK. We are a large employer and investor, with a long track record of successfully exporting from our UK sites. A summary of our UK footprint is at paragraph 14. 

 

  1. But within this substantial footprint, we sometimes have to adjust to reflect market realities. GE has three industrial sites in Rugby. Our Leicester Road site in the town is part of the GE Power Conversion business and serves the energy, commercial marine, naval and oil & gas sectors. With the exception of naval, these sectors face challenging conditions globally. From pricing pressures to falling sales, many of our competitors and customers have publicly discussed the difficult market conditions.

 

  1. The fall in oil prices over the last few years has led to significant investment reductions in the oil & gas industry, with spending declining from $740bn to $533bn, 2014-16. There is also a protracted downcycle in the marine offshore market, where new vessel orders are constrained by significant over-capacity (50+% of large offshore vessels are not currently being used). We need to respond to these realities and position the Power Conversion business for future success.

 

Business review & proposal to close Rugby site

 

  1. We regularly conduct thorough reviews of our operations, products and services to ensure we are meeting our customers’ needs and positioning the business for long-term growth. Over the past two years, restructuring has been required at Power Conversion sites in Canada, USA, Germany, France, China, Brazil and Mexico.

 

  1. In 2017, we completed a review of our global rotating machines manufacturing footprint, which includes the Rugby site. The conclusion was that:

 

  1. there are challenging conditions across Power Conversion’s power markets and little indication of improvement in the oil & gas and commercial marine segments;
  2. contracts for the next large naval programme - the Type 26 ship (batch 2) - were not likely to be placed until 2021 or 2022;
  3. there is significant under-utilisation of sites, with duplicated support functions and, in many cases, single shift operations;
  4. the current site footprint is unsustainable. Consolidation is required to reduce product costs and increase competitiveness; and
  5. the Leicester Road site’s order book is at an unacceptably low level.

 

  1. The conclusion of the 2017 exercise was a proposal to:

 

  1. cease manufacturing and supporting activities in the rotating machines facility at the Leicester Road site; and
  2. consolidate the European and North American rotating machines footprint to Nancy, France. 

 

  1. Closure would affect up to 197 roles. GE’s Power Conversion business currently has approximately 625 employees in the UK.

 

Timeline & consultations

  1. A more detailed timeline is set out at annex A. The key milestones during the 17 months of consultation so far are:

 

2017

7 December              Consultation on restructuring opened at a European level in the Power Conversion business.

 

2018

11 April                            Phase 1 of the UK restructuring consultation opened. Phase 1 assessed all

UK roles in GE Power Conversion, except for the Leicester Road site, which

was excluded in order to give the site additional time to win new business. 

 

30 May              European Works Council delivered opinion on restructuring plans and  European-level consultation subsequently closed.

 

7  September              Phase 1 of the UK restructuring consultation closed. Approximately 60 positions were removed, but there were fewer than ten compulsory redundancies.

 

19 October              Phase 2 of the UK restructuring consultation opened. Phase 2 was solely about manufacturing and related support functions at the Leicester Road site. Consultation was due to run until January 2019.

 

2019

17 January              Extension of the Phase 2 consultation to allow time for GE to consider a proposal presented by the employee representatives and to continue discussions with the Ministry of Defence, and other customers.

 

4 April               Update for all employees advising that consultation would continue to allow more time to bring discussions to a conclusion.

 

  1. As the more detailed timeline at annex A shows, we have given significant time to the consultations, with regular employee meetings and extensive discussions with customers, the unions and the UK government.

 

  1. Those discussions included working on a number of proposals which could support the Leicester Road facility, albeit on a reduced scale. We also continued our discussions with the employee representatives on an alternative business solution, focusing on high technology programmes such as naval, power quality, R&D and services.

 

  1. We have maintained an open approach during the consultation. This has included visits by the local Conservative MP, Mark Pawsey; the leader of the Labour Party, Rt Hon Jeremy Corbyn MP; Labour Party spokespeople (e.g Nia Griffith MP and Chi Onwurah MP); Debbie Bannigan, Labour Party candidate for Rugby; and the trade unions (e.g Steve Turner and Linda McCulloch, national officers at Unite; and Zoe Mayou, Unite’s regional officer).

 

Employees

 

  1. We recognise that this is a difficult period for our employees and their families. If closure was confirmed, GE’s Power Conversion business would provide a severance package, including outplacement services. We would work closely with all affected employees to identify other employment opportunities, whether within another GE business or externally. To date, we have re-deployed 19 staff to other local GE businesses.

 

Latest position & next steps

 

  1. Our discussions with the UK government about the Leicester Road site have been positive and they are continuing. We expect to reach a conclusion in the near future. Any announcement about the next steps will be made to our employees first, but we will ensure that the Committee is informed of any proposed decisions as quickly as possible.

 

GE in the UK

  1. GE has been present in the UK market for 128 years. We currently have 16,000 employees across several businesses: power, grid, aviation, healthcare and oil & gas. Our UK sites are served by thousands of local suppliers. Some of our other UK business highlights include:

 

 

14 May 2019

 

 

 

 

 

 

 

 

 

 

 

 

Timeline                                                                                                                                            Annex A

 

2017  

 

2018

International Trade (DIT)

International Trade (DIT)

 

2019

 

Note: this is a non-exhaustive list of the main meetings & milestones over a 17-month period. Other meetings/calls were held.