Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
Breaking News: IAM-Boeing strike is on!
From the IAM website, 3:45pm PDT Sept. 5:
The Strike Is On!
Brothers and sisters:
The strike will commence at one minute after midnight tonight. This Company disrespected the process, bargained illegally and most of all, disrespected the finest Aerospace workers anywhere on the planet by failing to meet your expectations.
Despite meeting late into the night and throughout the day, continued contract talks with the Boeing Company did not address our issues. Armed with your strong strike vote, the IAM Negotiating Committee continues to try and convince the Company to meet our members’ demands.
Your Negotiating Committee appreciates the support of all of our members during this interim time period and will appreciate your continued support as we picket the gates at 12:01 a.m. Saturday, September 6.
I want to thank the mediation service, who diligently tried to help secure a contract short of a strike to avoid hardships on our members. Unfortunately, those services did not secure an offer.
We are ON STRIKE at 12:01am tonight.
If this Company wants to talk, they have my number, they can reach me on the picket line.
In Solidarity
Tom Wroblewski
District President and
Directing Business Representative
From Dominic Gates at The Seattle Times:
BREAKING NEWS: Machinists strike is onAfter the failure of a last-ditch bargaining effort, Boeing machinists will go on strike from midnight tonight.
“The strike is on,” said Mark Blondin, speaking from Orlando Fla., where talks between the top International Association of Machinists union leaders and Boeing executives in Orlando, Fla., failed to reach agreement and ended today at about 3:00 Pacific Time.
“We just didn’t get to a place where we could reach an agreement,” Blondin said. “”We tried to exhaust every avenue.”
“We met with the mediator last night and all day today,” he said. “There was no formal offer to bring back to the members. There’s nothing to bring back.”
At the expiry of a 48-hour extension of the contract to allow time for the Florida talks, some 27,000 workers will go on strike and production of Boeing jets will cease as machinists stream out of the plants and set up pickets at the factory gates.
About 25,000 machinists work in Boeing’s factories along Puget Sound, some 1,200 in Portland, 700 on Wichita, Kan. and about 70 at Edwards Air Force Base in California.
Our take:
“Going into the mediation, I thought that the gap was too wide for Boeing and the IAM to reach an agreement in 48 hours,” said Scott Hamilton, managing director of Leeham Co., an aviation consulting firm based in the Seattle suburbs. “While the gap between the 11% wage hike offered by Boeing and the 13% sought by the IAM was, I think, probably the easiest issue, the step-ups in the wage scale (six years in the Boeing proposal, three years sought by the IAM) may have been contentious.
“Health care and retirement benefits were extremely important to the union and equally so to Boeing. The IAM’s desire to limit future out-sourcing was probably a show-stopper. I think this has the makings of a long strike.”
Full story from The Seattle Post-Intelligencer, 4:10 PM PDT.
Boeing’s statement, 4:14 PM PDT:
Boeing Statement: Renegotiation Fails; Strike Called
Friday September 5, 7:14 pm ET
SEATTLE, Sept. 5 /PRNewswire-FirstCall/ — Boeing (NYSE: BA – News) issued the following statement after mediated talks with the International Association of Machinists and Aerospace Workers concluded today without reaching agreement on a new collective bargaining agreement, covering nearly 27,000 employees mainly in Washington, Oregon and Kansas:
“Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement. Unfortunately the differences were too great to close,” said Scott Carson, president and CEO of Boeing Commercial Airplanes.
The IAM has called for a strike to begin at 12:01 a.m. Saturday, Sept. 6. Boeing operations in Washington, Oregon and Kansas will remain open. Employees who are not represented by the IAM are expected to report for work as normal.
During the work stoppage, Boeing will support its customers and their airplanes in service. The company will continue delivering airplanes that were completed prior to the strike, and will continue providing customers with spare parts. Boeing does not intend to assemble airplanes during the strike.
MSNBC story, 4:10 PM PDT: Strike could cost Boeing billions.
Wall Street Journal story: Labor talks fail.
Update, 6:35 PM: Boeing is holding a press conference that so far is reiterating the statement (posted above) and a recap of its “best and final offer.” Boeing has been in contact with suppliers to tell them whether to ship parts, store them at their facilities or stop producing parts. No names were mentioned.
Boeing did not identify sticking points.
Boeing did explore options but the spokesman did not know details. The future “we are interested in speaking to the IAM and we’re open to that and when we hear from them, we’ll do that. There have been no new meetings” scheduled.
That’s it for the conference.
Nothing new from the IAM at this time.
Update, 6:55 PM PDT: We just spoke with the IAM spokesperson, and it seems there is some common ground with Boeing after all. Tim Healy, the Boeing spokesman, said he didn’t have any details because he wasn’t in Florida during the negotiations there. Connie Kelliher told us she didn’t have any details because she wasn’t in Florida, either. Just as Healy could not provide any details about what was discussed and where the impasse lies, neither could Kelliher. Like Healy, Kelliher restated the IAM position.
Healy said Boeing will wait for the IAM to call; the IAM leadership said it’s up to Boeing to call, and they can be reached on the picket lines.
REMINDER TO ALL POSTERS:
No invective, profanity or personal attacks will be allowed. Stick to the issues, debate the “facts” as you see them, vent your frustrations but no personal stuff permitted.
Scott – Given the fact that future out-sourcing seems to be one the most contentious issues, perhaps now is the time for a thorough examination of how Boeing came to decide to out-source both the design and production of most of the 787’s fuselage and wing. It was obvious from the beginning that the composite design and produciton issues were revolutionary. So why didn’t Boeing at least do the design work in house, along with the initial production, and then farm out the perfected design? Who made this decision? And most importantly (and shocking), given the revolutionary nature of this work, how did it happen that Boeing did not supervise their partners’ design and production work sufficiently, with the result Boeing was unaware of the troubles Alena, Vought and Mitsubishi were having until initial fuselage and wing parts began to arrive in Seattle? Specifically, how could fuselage sections arrive in Seattle needing more than 30,000 parts (according to Mike Baer) instead of the 1200 Boeing anticipated?
All this has resulted in one of the most embarrassing and humiliating industrial botches in history, to say nothing of lost business opportunities. One wonders if Alan Mullaly saw this disaster coming and that is why he jumped ship.
Terribly disappointing. Boeing is a great place to work and I am proud to be a part of it.
That said, I think most would agree to lower numbers in exchange for a moratorium on outsourcing of work. The best contract in the world is meaningless if your job is shipped overseas. Believing the inevitable, many would like the best deal they can get before their job goes.
Something like 70% of each aircraft is manufactured outside the states now to capitalize on wage differential.
There are greater geopolitical and corporate plays at work here. With US Inflation running in the 9-12% range, EVERYONE in the US is losing ground in purchasing power. Neither Boeing nor the Machinist can be faulted for their positions.
It simply is what it is.
Every wage earner in America will need higher wages to keep up with inflation, and US Corporations, in searching for ways to cut costs, will offshore labor until we are a hollow shell of the country we once were. At that point, other countries will have the incentive to offshore back to us. Regrettably, this trend appears unstoppable.
I strenuously recommend some advanced reading on this subject. For the short attention span, :
http://www.youtube.com/watch?v=pMcfrLYDm2U
http://www.youtube.com/watch?v=ljbI-363A2Q&feature=related
For the more cerebral:
Financialsense.com
shadowstats.com
stratfor.com
http://www.marketoracle.co.uk/
Try not to be a sheep. I know Paris Hilton is much more interesting than some dry, boring financial commentary but all of our futures depend on each of us doing just a little more.
Good luck to us all and (your deity here) bless America.
Kevin H.
A proud Boeing employee
The reason for the outsourcing is financial. Alenia, Spirit, Vought and Mitsubishi all brought their own development money into the program and hence this allowed Boeing to invest less money into the 787 then otherwise possible. This obviously means less profit for Boeing itself after contractors are paid out but in the end it spreads the risk of a new program. This is the model that Airbus is following to a degree, with GKN, Spirit and others on the A350 program. In one of the interviews, Bair emphasised that Boeing outsourced big work packages and did not micromanage the suppliers, which in the end was a mistake.
Thx for your response, Ukair. “Micromanage” is Bair’s word, and carries a pajorative meaning which allows Bair to dodge real issue. That is, why did Boeing, and particularly Bair, decide not to get involved with their subs in a way which would have informed them of the mess their subs were making, whether this involvment is called micromanaging or partnering or just plain helping? How could Bair have put himself in a position to be surprised by the huge amount of travelled work needed for Dreamliner One, and to lose his job as a result?
As for spreading the risk, maybe Boeing have spread the financial risk, but they quadrupled the risks of engineering and production failures, which are now costing much more than they saved by out-sourcing.
Another financial reason to outsource is that it is easier to control costs. It’s easier in the accounting department to send a single check to a company than to calculate how many of their own people are assigned on what project and how much work is actually is performed on the project. This also applies to assets such as tooling. Tooling decreases in value over time but there is no way to quantify exactly what that decline is at any given moment so the company is forced to estimate it, which consumes more man-hours than if they simply cut checks to suppliers and have them be responsible for the tooling.
Not an ideal situation obviously, but that is one reason why corporations keep outsourcing to suppliers. The “the company loses money because we always have to re-work the incoming parts because they are so bad” argument is not quite as solid as some make it out to be. The company saves money by not having to track costs and assets if it was in-house, but loses money by re-working parts.
The $64,000 dollar question is…which method is correct? I’m no corporate accountant (aero engineer) so I’m not really sure, but I can see both sides of the argument. Accounting and finance people should not be in charge of any engineering company.
I know this is a simplified general description, but I believe the point is still valid. Obviously the 787 is way beyond this point. 😉
Christopher, I agree with you that there are questions as to how Boeing mismanaged the suppliers. In the end they will get there and will learn from the experience.
I think they have bitten off more than they could chew from the start. Going composite in many areas + a new outsourcing model. They should have done one or the other. 787 should have been done in-house, developing and perfecting the technologies. Then 737RS could have been outsourced heavily to the Japanese. The latter is going to happen anyway. I reckon because:
1. Boeing said the outsourcing model will not change.
2. Boeing can give up on the 100-150 seat market by entering into a joint venture with Mitsubishi. For Mitsubishi it will make perfect sense since they have MRJ and going up in seat count would be logical. Also the financial benefits for Boeing are big.
3. For Boeing, this ensures that the response the C-series is effective and they can concentrate on 150-200 seats.
But first…. they have to get the strike sorted! 🙂