Odds and Ends: FT on BAE-EADS; Boeing-SPEEA dispute getting ugly; Arik Air

BAE-EADS: The Financial Times of London has this analysis, from the British perspective, of the proposed merger between BAE Systems and EADS. Bloomberg News has this analytical piece. And when the merger was announced, Boeing CEO Jim McNerney didn’t have objections. Now he says the merger needs scrutiny. Seems to us he woke up to the long-term potential impact of a strengthened EADS in future competitions for US DOD contracts, including the next round of tankers–the KC-Y. Here is a report of McNerney’s original reaction.

Boeing-SPEEA: The contract dispute between Boeing and SPEEA is getting uglier by the day. SPEEA has outright accused Boeing of lying over terms and/or negotiating tactics. If you follow SPEEA on Twitter, you can see the vitriol increasing almost by the hour.

Boeing, for its part, spent the summer confining discussions to only one topic at a time, rejecting SPEEA contract offers, then dropped a full offer on SPEEA only a couple of weeks before a contract vote was to commence–then expressed bewilderment at SPEEA negotiators sending the contract for a vote with a “no” recommendation. We see some parallels in Boeing’s approach to those it followed with the disastrous 2008 IAM 751 negotiations. We think the contract will be rejected by a comfortable margin.

Nigeria’s Arik Air: The airline ceased domestic operations. The airline has eight Boeing 737s, two 747-8Is and seven 787s on order.

6 comments on “Odds and Ends: FT on BAE-EADS; Boeing-SPEEA dispute getting ugly; Arik Air

  1. Scott, Your characterization of the Boeing SPEEA negotiations seems unfair. Boeing specifically stated and indicated that the early “discussions” which were commenced were not “Negotiations” but a time prior to the submission of a proposal when issues could be clearly defined and understood. Then, and closer to the expiration time, a full proposal would be offered and there could be more focused and productive negotiations.

    Instead, SPEEA offered to renew the existing contract and then placed the first proposed contract to an immediate vote of the membership/ There is/was alot of rhetoric following these steps and what was an attempt at pre negotiation understanding and clarification was undermined.

    Today, Verizon announced a settlement with the Communication Workers of America and the Brotherhood of Electrical Workers. The terms of the settlement followed a lengthy period of difficult negotiations over months as well as a strike. It contains many of the proposals which Boeing tried to introduce with statistics and industry information to show the state of the industry and the engineering workforce. New Hires at Verizon will not participate in the Company’s pension but will have 401K’s; additional health care costs were passed on to the workers, wages were increased by 2% per year for four years.

    Although not identical, these terms or the general pricipals of these terms were what Boeing was trying to present. They represent , obviously, a way of addressing present and future issues for the Labor force and were accepted by the 45,000 workers at Verizon. It was not out of “disrespect”.

    Companies and Municipal governments know that pensions must be reset…Verizon’s example shows a possibility. I am sure there are many other issues that distinguish these Agreements, but Boeing did offer 3% for each of 4 years to its engineers.

    I would surmise that after all the rancor and rhetoric and misunderstandings are completed, SPEEA and Boeing will be able to arrive at a settlement …many of the agreements mirroring aspects of Verizon’s settlement because there is a new reality about the American Workplace and the American economy. The transition period to this understanding is what creates the issues but respect for each others needs and interests can result in a satisfactory solution. Verizon and it Labor force found that out the hard way but eventually. I am hoping Boeing and SPEEA can avoid that temporary dislocation.

    • I’ve addressed this point before. Negotiations is about reaching an agreement. An agreement requires both parties to agree. You cannot have one side insisting that they are going to tell the other side how the agreement is going to be.

      That’s what Boeing attempted with SPEEA.

      SPEEA was prepared to engage in substantive negotiations since last Fall. Boeing insisted that it needed to “educate” SPEEA before it would engage in substantive negotiations. SPEEA vehemently disagreed but was willing to give Boeing some space to proceed as it wanted. As the weeks turned into months of one-sided lectures, SPEEA grew increasingly frustrated. Boeing refused to modify their approach to take into account SPEEA’s desire to engage in substantive negotiations.

      As the tensions rose, the Boeing team shifted to open mockery of the SPEEA team telling them that they didn’t really represent the membership and that Boeing would do what was best for everyone. The approach was: “This is what we’re going to do. If you’re too stupid to understand why this is the best thing to do, we’ll just bypass you and take our case directly to the employees.”

      Engineering leadership stopped even attending many sessions. Mike Delaney skipped the session where Boeing proposed cutting the pension and went golfing instead. This sent a pretty strong message. Ray Conner never once weighed in on the negotiations. Boeing corporate from Chicago ran everything with a pretty open disdain for the SPEEA negotiating team.

      Finally, on September 13th, Boeing presented a complete offer. Simultaneously, Boeing sent out communications to all the SPEEA members explaining how great an offer it was.

      Boeing’s plan was pretty simple (and arrogant). Boeing presented an awful offer with the idea that SPEEA would beg them to make it less awful. Boeing would then agree to some changes – landing exactly on the final offer they intended to give all along.

      SPEEA would have been fools to cooperate with this predetermined outcome.

      Instead, SPEEA called Boeing’s buff and turned the offer out to the membership to vote on. If the members overwhelmingly reject this offer, then Boeing will no longer be able to ignore the SPEEA negotiating team as if they were irrelevant. Boeing will have a simple choice of negotiating with the SPEEA team in good faith towards a mutually agreeable solution….or face an escalating conflict.

      Whoever devised Boeing’s negotiating strategy should be fired. They took a pretty compliant union who didn’t ask for anything beyond the status quo contract (under which Boeing has posted record profits) and turned them militant.

  2. There are such different renditions of what occurred that it makes an interested outsider wonder if there are simply parallel universes trying to describe one another with the underlying possibility that each party has its own strategy and agenda so that the process does not follow what would be expected. This is a high stakes endeavor: Management ostensibly representing the enterprise and contracting with its labor force; Labor negotiating with management for the best possible terms it can get; the Union ostensibly representing Labor but also fighting for its role as a Union; the shareholder expecting management to do a good job and balance competing and competitive interests; and each party interacting with the press and social media hyping various points of view. The web sites of Boeing presents information and updates (?) while the SPEEA site presents the shortcomings and failures inherent to the Boeing proposals. Which site is more accurate and reasonable.

    No matter what is said, it is taken out of context or placed in another context. SPEEA’s point about Boeing’s failure to serve employees on leave in the military serves as an invective to incite. Points that probably serve as rooks to sacrifice in the course of the negotiations/(game) become the cause to anger and disincentive.

    Boeing is presented as tone deaf and arrogant trying to disrespect its professional staff by disrewarding them their well respected contribution. SPEEA is presented as “whistling in the dark” about present and future trends in the American Industrial landscape. Union leaders who appear to be confrontational and hardheaded and trying to prove their mettle. Boeing Executives are characterized as remote and selfish and unwilling to reward others than themselves of the gains of the Corporation they lead.

    The shareholders are viewed as expendable and greedy investors while the engineers are viewed as the main creators of the products.

    All these issues come into play and the outcome will be determined by who can exert the most leverage over the other. Can the Union create enough anger to strike; does Labor believe it is worth striking; does Management understand the fair terms of employment and is willing to pay and reward its valued professional workers. Does any dialogue contribute to better understanding or does it all get played out only when contracts threaten to expire and strike possibilities are measured and weighed against the ensuing costs. Is it only a strike that makes the parties move in directions it would otherwise avoid.

    All these thoughts are possible especially when neither party enters into the discussion with the full attention and desire to understand the others position. Months of preliminary discussions were set aside to improve and clarify negotiations. It is hard to understand how a scorecard with issues and differences was not drawn up and the differences explored and defined carefully so they could be traded off or offered for renegotiation. Instead, the rhetoric increases and the differences become more implacable. The strategy , seemingly premature in its timing, will create a negative vote and give more leverage to the Union. Perhaps this is what it is all about….a white knuckle wrestling match with little effort to accept words since neither side accepts the truthfulness or sincerity of the other.

  3. BAI: “The shareholders are viewed as expendable and greedy investors while the engineers are viewed as the main creators of the products.”

    Well, if you are a normal shareholder you have not invested in the company per se. You have bought stock, no money of yours have gone into the company for any development of future products or businesses.

    Expecting dividends without contributing to the company’s development can be seen as greedy from more than one perspective.

    Passive shareholders are not doing much good to any company, but sure a hole lot of evil… (the constant yearn for an ever increasing stock price no matter what giving us quarterly capitalism is but one example).

    Active shareholders, on the other hand, are , for the most part, unsung heroes.

    As for the engineers being the main creators of the product, I guess few would argue that in the concieving sense that would be wrong. Who else, have the beginning thoughts on the first embryo of an aircraft, its engines, system, and so on. Sure, others may have visions, but to get from there there is always a first embryo made by an engineer or similar.

    Then, of course, it is the workers on the floor that makes the product come into life.

    • mneja, Just a reminder that the shares were originally sold by the Company to raise funds for Company use and growth. The Institutional Investors play some role in that the price of the shares and the outlook for growth contibutes to influence Management as any “shareholder/owner” would interact and discuss matters with Management. Simply put, all the parties should be working together for the success of the enterprise and the benefit for all involved. Many Engineers,workers and staff are owners of shares.

      The main point is everyone is claiming a monopoly of importance, but in truth, effective collaboration is needed for the Company to thrive. Each party has a role and the equilibrium should be fair and encouraging and open to meaningful dialogue. It is unfortunate when communication cannot relieve discontent

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