Photo by Jeremiah Patterson, Investigative Reporting Workshop
A new company takes over, a new reality sets in
Wednesday, December 26th, 2012
This story is co-published with NBCNews.com, and is the first of two parts.
WATERFORD, N.Y. — Momentive Performance Materials sprawls near the banks of the Hudson River, just outside Albany, N.Y., its silver silos and windowless sheds nestled in the low, rolling hills. Men who work there see deer on the road as they drive their pickups to work.
Inside the plant, the tranquility vanishes. It's not just that the workers are handling toxic, explosive chemicals. That's par for the course in silicone manufacturing. Many Momentive employees have been at the company for decades, back when it was part of General Electric. They accept the risks in exchange for a steady, sizable paycheck.
The problem is that the paycheck is neither as steady nor sizable as it used to be.
Apollo Global Management, a private equity firm, bought the former GE Advanced Material (Silicones & Quartz) in 2006 and renamed it Momentive. Two years later, in the middle of a three-year contract, Apollo slashed the wages of some 450 union workers by up to 40 percent. Suddenly, workers found themselves being paid what they had made 10 or 20 years earlier. (GE is a part owner of NBC-Universal.)
The Momentive workers were standing still, but the world was changing around them. A contract isn't what it used to be. The men — and they are mostly men — at Momentive have what millions of unemployed Americans covet: a job. And not just any job, but a union job in manufacturing, the kind of job likely to get increasingly rare as right-to-work laws spread. But that job pays less than it did a decade ago, and many Momentive employees say they're slipping backward. Some are losing their homes. This is job security in 2012, the new face of stability in the American workplace.
A storied history
Momentive produces silicones for dozens of familiar brand names. Its customers include Goodyear, Motorola, L'Oreal and The Home Depot. Its silicones are in caulks, gaskets, carpets and bedding. They're the conditioning ingredient in "2-in-1" shampoo. When Neil Armstrong took his one giant leap, the sole of his moon boot was made of silicone rubber produced at the Waterford plant.
Workers used to make 700,000 pounds of silicone gum every week at the factory, according to one longtime Momentive worker, who like many others interviewed for this story spoke on condition of anonymity, fearing retribution from the company. Now, he says they make less than 200,000 pounds.
It's not clear if the overall production has declined or been shifted elsewhere. In addition to its factory in New York, Momentive has factories in Ohio and West Virginia, Japan, Germany and Italy. A finishing plant started up in Chennai, India, in 2010, as did a joint venture in Jiande, China. Another Chinese plant is slated for completion in 2013.
Momentive declined to share production information, but in a statement it said, "Waterford continues to be an important facility in our North American network and we have recently consolidated our Silicones and Quartz divisional headquarters at this site. It is also critical that we continue to strengthen our global footprint, which will allow us to meet the needs of our geographically diverse customer base."
New owners, big changes
When GE spun off its silicones plant six years ago, the Waterford workers were apprehensive. They had a pretty good thing going, and most weren't excited about a change. Back then, it wasn't uncommon for a Momentive worker to take home $100,000 a year — serious money for seriously skilled labor. "I make more than some husbands and wives combined," one man told me. But, he said, "It's not a perfume factory down there." The plant operates 24 hours a day, 7 days a week, 365 days a year. The men say they regularly worked 60- to 70-hour weeks, including overtime. Schedules of seven days on, one day off, seven days on again were common, they say.
2009 photo by Adam Berry, Bloomberg via Getty Images
Leon Black, chairman and CEO of Apollo.
As the union negotiated its first contract with Apollo, it was bracing for major cuts, said Dominick Patrignani, president of IUE-CWA Local 81359, part of the Communications Workers of America, which represents workers at the Waterford plant. Apollo's $3.8 billion acquisition of the company, completed in December 2006, was financed with more than $3 billion in debt, and workers figured the company would be tightening the belt.
To their surprise, the agreement reached was nearly identical to the previous contract under GE. The three-year contract, which covered two locals at the Waterford plant and workers at a Momentive facility in Ohio, was signed in October 2007. A company newsletter praised it, saying it "locks in gains in pay and pensions" and "retains key job security provisions."
That didn't last.
Craig Morrison, chairman, CEO and president of Momentive.
In December 2008, days before Christmas, more than 400 hourly workers at Momentive's Waterford plant were called in to speak with their supervisors. One by one, workers were each told that their pay would be cut, workers say. They would be assigned to new jobs, with new duties and wages.
In a written statement, Momentive said it has had to make "difficult decisions regarding our operations in a challenging economic environment to remain competitive on a local and global basis."
Workers were told that the pay cuts sought to bring their wages in line with the prevailing wage in the region, they said. But as several noted, others in Saratoga County don't work with toxic and dangerous materials. Their wages should be compared to those of workers in the chemical sector, they said.
Those new wages also varied wildly, according to documents obtained through a Freedom of Information request to the National Labor Relations Board. One man, a 35-year veteran of the plant, dropped from $29.11 an hour to $17. Another, closing in on 20 years at the company, dropped from $29.11 to $19.50. A man with two years on the job kept his $29.11 wage rate. The longest-tenured worker, with more than 39 years of experience, went from $29.11 to $24. A plant services operator, hired in 1978, found himself earning $14 an hour — a cut of almost $12 from his previous wage.
"Guys with a year or two of service ended up with a higher rate than I did," said one longtime worker who has two children in college. Before the cuts, he earned $27.31 an hour. His new hourly wage was $19.50.
The wage cuts were like "an attack on my family," another Momentive employee said. He has two children, too, and he regularly worked 70-hour weeks to "give them a good opportunity to go to a good school, get a good education, without going into debt."
If the company had proposed a 5 to 10 percent pay cut for all workers, including management and technicians, that would have been easier to swallow, several men told me. "It was the arbitrariness that really pissed everyone off," one said.
In fact, Momentive executives did take a 10 percent pay cut, in April 2009. But in January 2010, just as the workers' pay cuts took effect, the executives' "temporary pay reduction" was reversed, "as a result of the recovery in our business," according to the company's 2010 annual report.
As the Momentive workers saw it, the abrupt wage changes violated the contract signed in 2007, less than 18 months before the pay cuts were imposed. The local representing the affected workers filed 477 separate complaints with the National Labor Relations Board in January 2009, one for each affected worker. They asserted that Momentive "has been engaging in unfair labor practices," by changing wages, promotion, how people got overtime — all things spelled out in the original contract.
The company argued that negotiating wage and rate changes at the local plant level was allowed, under the terms of the national agreement. The company said the changes were needed to stay competitive and bring wages in line with the skills required.
More than a year later, following months of investigation, the NLRB responded. The board found that Momentive had indeed "failed to continue in effect all the terms and conditions of the National Agreement." In other words, Momentive had broken the contract.
The board sought an order requiring the company to restore the wage scale, rate, progression, job descriptions and several other points. The board also wanted the company to pay interest on any back pay or other monetary awards.
The NLRB scheduled a hearing for April 5, 2010. That hearing got pushed to June, in hopes that the union and the company would reach a settlement, a common move in such cases.
But June 2010 was also when the original three-year contract — the one Momentive had broken with the wage cuts — was slated to expire. When Momentive executives proposed a deal, the union found itself negotiating a settlement and a new contract at the same time.
The proposed settlement was simple: the 400-plus workers whose wages were cut would get back pay covering their lost earnings. Going forward, though, they'd all be getting the new, lower wage, in their newly defined positions. The company agreed to a $2 an hour bump — on the reduced pay. The NLRB case would be closed, ending any negotiation over job descriptions or the other issues in dispute.
Workers said the union dangled the settlement payments at the vote on the contract, held in the company firehouse at the Waterford plant. "They had a box of envelopes, and the envelopes had statements in them with a number, how much money each worker would get in back pay, under the settlement," one recalled.
They also warned that "if you keep going with the NLRB action, it could take years," several employees said.
By the time of the settlement proposal, which called for payments of more than $10,000 for many of the workers and more than $30,000 for some, many whose wages had been cut were struggling. "They were just so desperate," one said. "They were just in a hole," another added.
Still, workers in Local 81359 say they voted down the contract, preferring to move forward with the NLRB action.
But they weren't the only local voting. The contract covers three bargaining units, including another local in the plant, representing salaried and technical workers, and workers at an Ohio branch. Although those workers didn't have their pay cut, and weren't covered by the settlement, they were given the power to approve or reject it, because it was tied to the contract. Those locals voted to approve the proposal, and the contract was ratified. The workers got back pay with interest, but the wage cuts would stand.
Not everyone at Momentive took a pay cut.
Steven Delarge, a Momentive executive, received a bonus of more than $400,000 in 2010, in part for his role in "the successful completion of collective bargaining agreements" with union workers, according to the company's annual report. He also got a raise, bumping his salary from just under $400,000 to $450,000 in 2011. He has since left the company.
Momentive CEO Jonathan Rich received a bonus of $1.3 million for the year, The bonus was based on "the achievement of applicable performance targets," according to the company's annual report, although the company "did not achieve its safety objective," an area under Rich's responsibility. Rich, who left the company in October 2010, also received severance payments of $975,000, and an additional $350,000, the reasons for which are not spelled out in company filings. His total compensation for the year was more than $6.5 million, according to company documents.
The current executives, Craig Morrison and William Carter, are well-compensated, too. Morrison's total compensation was nearly $3.5 million in 2011; Carter's, more than $2.6 million.
Apollo Chairman and CEO Leon Black is also doing well. Last year, he celebrated his 60th birthday with a blowout at his Hamptons home, featuring "a seared foie gras station" and a $1 million performance by Elton John, according to the New York Times. Apollo Global Management declined to comment for this article.
Part 2: After buyout, workers get a lesson in modern economics.