GE Under Bipartisan Fire from Senators For Offshoring Defense Contracts

The U.S. Senate is expected to vote this week on whether to advance the Pentagon's annual funding bill, and a key requirement missing from this year's $858 billion package is to ensure defense dollars are being spent on manufacturing done in the U.S.A.

As was exposed with the shortage of personal protective equipment (PPE) during the COVID-19 pandemic, America can find itself at the whims of foreign adversaries like China when it comes to accessing goods critical to the nation's security.

Following Russia's invasion of Ukraine, the manufacturing of defense technologies abroad has come under increased scrutiny. Retired Army Brigadier General John Adams explained to Newsweek that carrying out manufacturing domestically provides the nation with a trained workforce that can ensure sustained access to goods of the highest standards.

"In a crisis we can't rely on foreign countries to supply the equipment we need, but moreover, we need our economy to work," Adams told Newsweek. "One of the hardest things to do in any industry is to train the workers who can do manufacturing. Once you lose that capacity, it's gone."

Members of both parties in the U.S. Senate have taken steps to shore up supply chain vulnerabilities, including a bill ensuring the U.S. moves to end its dependence on China and Russia for critical defense materials.

General Electric (GE), the 130-year-old Boston-based conglomerate, known for producing items ranging from refrigerators and lightbulbs to fighter jet engines, has come under criticism for moving defense contracts overseas.

In blue states like New York and Massachusetts, GE moved contracts for assembling parts for military jet engines in Lynn, Massachusetts and producing gas turbine elements in Schenectady, New York to countries including Romania, Poland, and South Korea, a Cornell and University of Massachusetts Boston report published in November 2021 found. The report also states that the company has shifted work within its renewable energy division to China.

Jet engine rebuilding and maintenance work once carried out in towns in red states such as Madisonville, Kentucky and Arkansas City, Kansas have been offshored to Singapore and Malaysia. In 2020, GE sold its lighting division to Savant Systems, which in Fall 2022 shut down the last GE residential lighting plant in the U.S., located in Bucyrus, Ohio.

In comments sent to Newsweek, a GE spokesperson called the Cornell and University of Massachusetts 2021 report "deeply flawed and inaccurate," and said GE has a "strong commitment to manufacturing in the United States."

"GE has invested more than a billion dollars in its U.S. facilities over the last six years, including more than $36 million in our Lynn, MA and Madisonville, KY facilities last year," the spokesperson wrote. "We are proud to employ more than 55,000 Americans and have hired more than 550 employees at our Lynn facility since 2017."

Newsweek contacted the Department of Defense, which declined to respond specifically to the issue of GE offshoring. But DOD spokesperson Lieutenant Commander Tim Gorman directed Newsweek to a Pentagon report that he said "highlights the importance of assured access to critical manufacturing capabilities":

"Working in close partnership with industry and the interagency, DoD will further develop acquisition strategies and contracting mechanisms that favor domestic sources and collaborate with international allies to diversify domestic and allied supply chains to support the on-shoring and ally-shoring of critical supports," the report states.

"For those supply chains that are critical for national defense," the report adds, "the U.S. is committed to ensuring reliable production access within its defense industrial base."

U.S. lawmakers representing states impacted by offshoring struck a stronger tone, suggesting that Congress may take action to address the concern itself. The upcoming vote on the National Defense Authorization Act (NDAA) presents a potential opportunity for such action.

Newsweek reached out to senators from some of those states for comment.

"Defense contractors such as GE should be investing in U.S. workers and doubling down on domestic manufacturing in communities like Lynn, not offshoring jobs abroad," Democratic Senator Elizabeth Warren of Massachusetts told Newsweek. "We need stronger rules so that companies who receive taxpayer dollars are more compelled to strengthen our supply chains at home, which helps prevent disruptive shortages and price hikes and also bolsters U.S. national security."

"General Electric is making a short-sighted mistake by shipping jobs overseas when it should be investing in American workers and manufacturing," Democratic Senator Ed Markey of Massachusetts told Newsweek. "As Congress is poised to pass another bloated defense budget that will award companies enormous contracts without protecting our American workforce, I support efforts to better understand and ensure how we can keep the manufacture and assembly of critical defense components here in the United States."

Democratic Senator Sherrod Brown of Ohio explained to Newsweek that the U.S. needs to reverse course on offshoring in order to bolster its security.

"Decades of bad trade and tax policy have sent good-paying union jobs overseas, and they haven't been replaced by the manufacturing careers workers were promised," he said. "We need to make more in America and keep jobs in America — particularly when the jobs have the potential to concern our national security. I urge GE to rethink its decision to offshore these jobs."

Democratic Senator Kirsten Gillibrand of New York highlighted the national security concerns raised by offshoring.

"I think something like energy security is one of our top national security priorities," she told Newsweek. "I will look into this offshoring to see if it creates a national security concern."

Republicans also voiced their concerns.

When asked about the impact of the offshoring on Madisonville in his home state, Republican Senator Rand Paul of Kentucky told Newsweek, "we don't have an answer [now], but we're still looking into it."

Republican Senator Roger Marshall of Kansas laid much of the blame on the policies of the Biden administration.

"This administration either doesn't care or has no clue that its policies are forcing companies, like GE, to move jobs overseas just to produce the same product and have an even worse environmental footprint," he told Newsweek. "The worst part of all is the hard-working Kansans who are losing their jobs because of Joe Biden's failing economic plan."

"It is totally backwards for a federal contractor like GE to spend our taxpayer dollars on overseas production," he added, "yet this is the situation we find ourselves in because President Biden's policies encouraged GE to outsource its operations."

GE revenues have declined during the first two years of the Biden administration, as did those of many companies worldwide in the recession brought on by the COVID-19 pandemic. But GE's problems predate the epidemic. The company has not seen a year-to-year increase in revenue since 2016, when revenues jumped to $103 billion from the $94.5 billion posted in 2015. In 2021, the firm posted more than $74 billion in revenue.
During this calendar year, GE stock price has ranged from a low of $59 to a high of $103, while in 2016 its stock price was consistently above $200 a share.

In November 2021 the company announced its intention to restructure, splitting into three firms — GE HealthCare, GE Aerospace, and GE Vernova, which is comprised of its energy assets.

GE states that this moves provides it with "strategic and financial flexibility to pursue growth opportunities." Forbes reports that the move will support efforts to reduce debt while resulting in "nimbler" companies with greater ability to "to deliver innovative customer solutions."

General Adams said that this restructuring presents a new opportunity for the firm to rethink its offshoring practices. Adams said that during his time flying aircraft in the Army he relied on GE engines to carry out his missions, and hopes the country can continue to do so.

Adams said he's met GE workers, and "many of them" are veterans. The patriotic spirit that led them to serve, he said, continues in their work for GE as they produce military equipment that supports U.S. national security. Yet, Adams said they soon may find themselves "standing up for America" by taking a stance against their employer to prevent the further offshoring of jobs.

The Industrial Division of the Communications Workers of America (IUE-CWA), the union representing the largest portion of American GE workers — plans to demand change ahead of its June 2023 contract negotiations with GE.

Jerry Carney, the union's chief contract negotiator for GE, who has worked at one of the company's plants in Louisville, Kentucky, told Newsweek that when negotiations begin he wants the company's word that the restructuring will not be used to roll back the benefits and rights currently afforded union workers.

He also wants assurances regarding offshoring.

"When we go to the table, I expect some type of commitment from the company to keep what work that we do have in-house," he said, "and to stop offshoring and to bring the work that you have offshore and bring it back into our communities."

GE has already seen protests at its Schenectady, New York plant over the company's offshoring. Carney also stressed the need to maintain pay and union protections ahead of the split. He said he anticipates a battle, and he sees increased concern from the company's retirees, who fear their earned benefits could be wiped away if one of the three GE offshoots goes under.

Carney hopes that his workers can avoid some of this uncertainty if Congress passes legislation to ensure that defense dollars are doled out to companies that are committed to carry out manufacturing at home. General Adams hopes for the same.

"Part of the NDAA can require that military equipment be manufactured in the United States," Adams told Newsweek. "We want to put it in the law that this equipment that we make, the items in the budget that we have, specifies that we make it at home."

"Let's use this NDAA for a purpose that really is patriotic good for the United States," Adams said. "We spend a lot of taxpayer money on GE. We give them lots of money. Let's not give it to them if they're going to take jobs overseas. Let's stop this offshoring."

UPDATE 12/15/22, 9:55 a.m. ET: This article has been updated to include the date of the Cornell-UMass report, and to clarify that the plant in Schenectady produces power elements. GE Global Director for Public Affairs Meghan Thurlow provided Newsweek with the following statement post-publication:

"GE has invested more than a billion dollars in its U.S. facilities over the last six years, including more than $36 million in our Lynn, MA and Madisonville, KY facilities last year. We are proud to employ more than 55,000 Americans and have hired more than 550 employees at our Lynn facility since 2017."

CORRECTION 12/16/22 9:30 a.m. ET: This article has been revised to include comments from a GE spokesperson received post-publication, and to correct errors of fact and inference made in the original version, published on 12/14/22. Revisions include: staffing levels at the Lynn, Massachusetts plant, role and work transfers rather than jobs moved or lost, the manufacturing product in GE's Schenectady, New York plant, the range of GE stock prices in recent years, and removal of an implied connection between a drop in stock valuation and GE's decision to restructure. We regret the errors.