Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- 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
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
- Airbus charges and write-offs since 1999: more than €33bn April 8, 2024
Could Boeing face new NLRB complaint over 777X site search?
Could Boeing face a new complaint with the National Labor Relations Board, this time over where the 777X assembly site will be placed? A Cornell University labor professor thinks it possible.
The union-backed publication In These Times wrote on November 25 that Boeing’s shopping the assembly site around following the rejection of a contract offer by IAM 751 November 13 is reminiscent of the 2009 decision to locate the second 787 assembly line in South Carolina in the aftermath of a 57-day751 strike in 2008. The 751 District filed a complaint with the NLRB that that decision was an illegal retaliation and the staff agreed, filing a formal complaint against Boeing and demanding that the assembly line be relocated to Everett (WA). The complaint was dismissed in 2011 when 751 and Boeing agreed to locate the 737 MAX line in Renton (WA) in exchange for a four year extension of the 2008 contract. The secret negotiations took place a year before the 2008 contract was to expire.
The November contract offer would have extended the 2016 contract to 2024 in exchange for dramatic concessions that the 751 membership rejected. Boeing said it would shop the 777X assembly site around if the members failed to ratify the contract, and this is exactly what Boeing did. Bids are due next week and a decision on a site location is due shortly after the first of the year.
In These Times wrote: Boeing’s thinly veiled ultimatum may represent a violation of labor law, according to Cornell University labor professor Kate Bronfenbrenner, the author of No Holds Barred: The Intensification of Employer Opposition to Organizing. “Boeing is doing exactly the same thing that they got punished for two years ago [in South Carolina],” she explains. “Threatening to move to get concession is bad-faith bargaining under the National Labor Relations Act.” At this point, it is not clear if the IAM will file charges with the NLRB against Boeing like it did two years ago.
Boeing, of course, would respond to any new complaint as it did with the previous NLRB action: it has a right to make a business decision where to locate its work. We would agree but for the history of making ultimatums. If Boeing had simply engaged in a bidding process to begin with while concurrently seeking a new contract as part of this bidding process and economic analysis, we think Boeing could avoid these sorts of confrontational upsets. As we wrote on November 21, Boeing could position such as a strategic positive rather than a confrontational ultimatum:
Confrontation and Ultimatums
Boeing has created the impression with Washington State, IAM 751 and SPEEA that it prefers confrontation and ultimatums to cooperation and accommodation. Boeing is not shy about telling these parties that “if you don’t do this, we will leave.” There is a fine line between being straight-forward and candid vs giving the appearance of ultimatums. Boeing seems to cross that line on a regular basis.
Boeing vs Airbus
Airbus diversified its production from its historical bases in Toulouse and Hamburg with a new A320 line in Tianjin, operations for several years, and Mobile (AL), now under construction. There is a significant difference in the positioning Airbus used vs Boeing’s approach. Airbus positioned these two new lines as strategic positives. Boeing used South Carolina and is now using 777X as tactical confrontations with its union, and to a lesser extent, with Washington State.
Few could have valid complaints if Boeing had issued Requests for Proposals first, with the union making an offer or negotiated a contract in parallel with the bidding process.
- Wisconsin emerged as a bidder for the 777X assembly site, the Milwaukee Journal Sentinel reports. Boeing didn’t send an RFP to this state; this will be an unsolicited bid.
- The Missouri State Senate has passed an incentive package; the House is to act shortly. There is a debate within Missouri over the wisdom of a bid and the presence of the IAM on Boeing’s St. Louis property (it’s a different District than IAM 751).
- In a Missouri twist, the president of IAM 837, the District at Boeing’s St. Louis plant, says that the 777X should be built in Everett.
- The Washington Post takes a look at the site selection process in this article.
- Washington State will submit a bid, writes the Puget Sound Business Journal, though it’s hard to imagine how it can improve upon the $8.7bn package already offered to Boeing. We’ve pointed out that the tax breaks offered, which are an extension of the 2003 787 tax breaks, were found illegal by the World Trade Organization, a decision that is under appeal and which state officials point to as making our concerns irrelevant. An industry source says we’re the only one making an issue of this. Not so fast–before the IAM 751 rejected the contract, we know the European Union was looking at the tax breaks. We understand Boeing is mindful of the issue, too. We hope Washington tweaks the breaks to conform with the WTO finding, as Airbus claims it did with A350 launch aid before drawing down government funding for the development of its newest wide-body airplane.
- North Carolina may submit a bid, reports the Charlotte Observer. North Carolina was the runner up to the site location for the 787 assembly line in 2003 that went to Washington State.
Interesting- When several years ago, Mr Albaugh gave an interview on TV with Mr D Gates ( Seattle Times ) and in answer to a question, made it clear that BA reason for a new site – move- was to avoid a strike- that statement was the basis for the NLRB filing. AS even the IAM tried to say at the time – BA could establish a plant forr a new airplane, etc anywhere they wanted, at any time – and for almost any reson, diveristy of facilities, transportation issues, improve production rates, etc ad nauseaum. BUT when an responsible level executive says ‘ to avoid a strike ‘ that is expressly prohibited as a reason. In that case it was basically ‘ foot in mouth’ disease.
So did BA learn from that ? Separate from the 7 late 7 fubarf issues of quality, greenfield, etc.
Apparently not. !
As I said before – IMO the current intimidation game is both a kubuki dance ( the end has been predetermined, the dance steps are for show – and a scene out of Godfather- ” your signature or your brains on the document ”
The 100 Billion $$ customer is ignored ??
That was strike 1 against Mr. Albaugh. Strike 2 was the very fancy downtown Seattle tower offices which cost $40M+ for the build out. The office was never fully occupied because the Power Point Rangers quickly suspected that they would also be in jeopardy if their offices were in this location. Even empty, the ongoing lease for the multiple floors was above $2M/year. Strike 3 was the very forceful statement of the need for the Max which Chicago did not want to do. Rumor has it that McNinney had him escorted off the premises. I guess when you incur expenses like this you have to watch labor rates and gut IT in the NW.
a bit of history may help re the 2010 complaint
..In fact, the complaint issued on April 20 by the Acting General Counsel does not seek to have the South Carolina facility closed. It seeks to halt the transfer of a specific piece of production work due to allegations that the transfer was unlawfully motivated.
The complaint explicitly states that Boeing may place work where it likes, including at its South Carolina facility, as long as the decision is not made for discriminatory reasons.
It doesn’t matter. The IAM has traded away unfair labor practice complaints in exchange for new contracts every single time. And they WILL do it again in 2016. So sayeth the Buffenbarger.
It is sort of hard to believe that the boeing legal brain trust has yet to figure out or understand labor law – something somehow somewhere there is an odor . . .
“Airbus positioned these two new lines as strategic positives. Boeing used South Carolina and is now using 777X as tactical confrontations with its union, and to a lesser extent, with Washington State.”
And I would argue that South Carolina and the 777x are strategic decisions to keep the economic viability of the commercial aircraft sector. The SPEEA/IAM 751 total cost of labor, which everyone likes to ignore, is already making the price of the 777x vs. A350-1000 questionable and will compound the problem with the IAM751 plans for 2016.
Jack – ur comment ..”The SPEEA/IAM 751 total cost of labor, which everyone likes to ignore, is already making the price of the 777x vs. A350-1000 questionable…
Do you have any support for that ? Approx 34% of the workforce is union ( SPEEA and IAM and UAW acccording to Annual repor page 4 )t- with most of that in seattle area ) – and reasonable estimates of labor cost are usually less than 10 percent of the costs on most models being produced. with the exception of 787, the 737 and 777 cash cows are far down the learning curve, and the late 7 is well on the way re labor costs/plane. Operating margins were about 9.6%( page 25) . Airbus also has unions- with better pension , vacation, and some health benefits, and has to put up with wildcat strikes or walkouts, etc.
So if you have some breakout of total cost of Union labor- compared to non union, I’m sure we would all like to see it !
BTW- dont forget that excess pension $$ can be and have been paper transferred into operating earnings. Which helps the executive bonme-us.
They can not spin it as strategic positives, because a) what they do is not driven by desire for economic or strategic positives, in fact it will deliver economic and strategic negatives and they know it, and they are unable to even keep the pretence, because b) they think they are Morally Right ™ in their quest for quashing employees.