IAM, Boeing talks fail; 777X site selection evaluation continues; Update: Members to vote on deal

Update, 11:30pm PST: KIRO TV (CBS Seattle) quotes Boeing spokesman Doug Alder as saying the Boeing offer has not been withdrawn, contradicting the IAM 751’s understanding.

Update, 9:10 PM PST: The Seattle Times reports the IAM 751 membership will get to vote on Boeing’s counter-contract offer after all.

Original Post:

Talks between Boeing and the IAM 751 machinists union failed to reach an agreement when Boeing presented a counter-proposal to the union’s offer that did’t budge on the pension issue, according to The Seattle Times.

KING5 TV (NBC Seattle) has this story.

Boeing’s statement is here.

IAM 751’s statement is below the jump (there isn’t a unique link to it).

The Boeing and IAM 751 statements paint a very different picture of the offers.

Our take:

Although both sides now have said talks have ended, we fully expect political pressure on both sides to resume talks before Boeing makes a final decision on the 777X assembly site.

Boeing said it will make a decision early next year; our sources suggest this timeline is the end of January.

This leave a small window for a third try, but we’re not optimistic.

We believe that barring an agreement, Boeing Chicago will elect to put the 777X assembly site and wing production somewhere other than Washington.

We believe that those within the IAM membership who believe Boeing is bluffing are mistaken. One need look no further than the events leading to putting 787 Line 2 in Charleston. Members believed Boeing was bluffing then, and it wasn’t.

As we have written many times, while Boeing Commercial Airplanes is understood to want to assembly the 777X in Everett, headquarters in Chicago has a very different view–and in the end, it’s only that view that counts.

One item in the Boeing statement stands out like Braille to us as well:

In addition, a separate agreement committing final assembly of the 737 MAX at the Renton, Wash. site would have been extended through 2024.

For those who think it impossible Boeing wouldn’t start another 737 assembly line elsewhere, we understand from two sources close to Boeing that a study is underway about opening a 737 assembly line in Charleston. Some 737 MAX work has already been assigned there, and Boeing continues to buy land there.

We firmly believe that the industrial logic–and all other logic–demands that the 777X (and the 737 MAX) assembly be in Puget Sound. But Boeing CEO Jim McNerney is clearly intent on moving work away from the unions (and from Washington State) absent dramatic changes in contracts and the cost of doing business.

Boeing offered terms and conditions in the IAM contract that were sure to be rejected.

The PR war of who is responsible will continue for some time to come. But just as we firmly believe the 777X should be built in Washington, we also firmly believe it won’t be without some last minute agreement.

Washington politicians need to step up their effort to look Beyond Boeing for the future of the state’s aerospace industry.

Wroblewski: ‘We were willing to give Boeing labor peace’

SEATTLE – Talks between the Boeing Co. and Machinists Union District 751 have ended after the two sides failed to reach an agreement on a proposed contract extension that would have guaranteed the 777X would be built in Washington state.

“Our members want to build the 777X, and we believe Boeing’s best chance for success for this vital airplane program is for our members to build it here,” said District 751 President Tom Wroblewski.

“However, the price Boeing demanded was too high,” he continued. “Our senior leadership team could not recommend Boeing’s counter-offer.”

“On Wednesday, the union had offered Boeing a preliminary contract proposal that would have guaranteed the company a total of 16 years of labor peace by extending the current contract, which has been in place since 2008, until 2024.

“Boeing’s leadership has said time and again during this process that this was a top priority, and we were wiling to give them that,” Wroblewski said. “We were willing to give them labor peace.”

However, Boeing’s counter-offer on Thursday was mostly unchanged from the proposal that Machinists had rejected by a 2-to-1 margin on Nov. 13, demanding steep concession in retirement and health benefits while limiting future pay increases.

Boeing’s offer Thursday was contingent on union leadership recommending acceptance, Wroblewski said.

“This we could not do,” he said. “Our members had already rejected this.”

Wroblewski said the union will continue to make the case that Washington is the best place for Boeing to build the 777X, which is the latest derivative of Boeing’s best-selling widebody jet.

“Machinists Union pay and benefits make up less than 5 percent of the total cost of building an airplane,” he said. “And for these pennies on the dollar, Boeing gets in return the most-skilled, most-productive aerospace workers in the world

“Any objective analysis will show that Boeing’s best business case is to build the 777X in Washington, utilizing the skills, experience and dedication of our Machinists Union members,” he concluded.

Wroblewski said he does not regret attempting to negotiate a new deal. “Going back to the table was the responsible thing to do,” he said. “We just couldn’t get to an agreement. Again, the price was too high.”

11 comments on “IAM, Boeing talks fail; 777X site selection evaluation continues; Update: Members to vote on deal

  1. And the game continues- but it was NOT the union that said no this time- it was the so called leaders apparently including buffenbarger who no doubt flew in again in his learjet. Since Buffenbarger controls the funds paid to the local he manages to stick his nose in on issues he certainly does NOT understand.

    After all, there were no real negotiations with IAM who did not have time to study and analyze the details or come up with a rational counter offer on the pension issue.

    Add to that the deep doo doo the International IAM and Buffenbarger are in re the election process ( which he will no doubt win again next year ) as indicated by the DOL

    http://www.dol.gov/olms/regs/compliance/volun_agree_2013.htm

    On August 15, 2013, the Department entered into a voluntary compliance agreement with the International Association of Machinists and Aerospace Workers (IAM), located in Upper Marlboro, Md., concerning the 2013 election of international officers. The IAM agreed to conduct new nominations and a new election, if necessary, for the offices of international president, general secretary-treasurer and eight general vice presidents under OLMS supervision prior to June 2014. The investigation disclosed that the union failed to provide notice of nomination to the membership regarding the nomination of international officers, local lodges did not provide notice of their nomination meetings to all members, and members were denied a reasonable opportunity to nominate candidates when some members were working at the time of the nomination meeting and/or endorsement vote and no alternative method of nomination was provided. The agreement follows an investigation by the OLMS Washington District Office.

    IMO I find it hard to believe that the guy with a 100 Billion check in hand did not make it clear re the 777x- or that even the BA bored would not pay attention.

    Scotts initial call re a cluster** was – in light of recent events – a simple description of the ‘ good ‘ points. ” The bad points cannot be posted here in polite company ;-PP

  2. about 9 15 seattle time seattle times claimed that the IAM members WILL get a chance to vote

    Rank and file to decide on ‘last’ Boeing offer, union leader says
    After talks broke down between Boeing and the Machinists union over placing the 777X work in Washington state, the union’s lead negotiator said the membership will get a chance to vote on what the company had said was its last offer.

    ….

    Rich Michalski, IAM lead negotiator

    Wonder if Rich knows anything in enough detail to negotiate – maybe he got a free tour of the factory to see a real plane close up that is bigger than the IAM learjet?

    bet the next up will be SPEEA

    and my guess is that this time IAM members will pass, since BA did sweeten tehe pot on most things but pensions…

  3. Switching to a defined contribution has some progressive merit to it. But isn’t a 10% defined contribution is a minimum funding for a modest retirement? 4% paints a rather bleak end game for workers . This seems a little at odds with Boeing’s image of optimism

  4. “Wroblewski said he does not regret attempting to negotiate a new deal. “Going back to the table was the responsible thing to do,” he said. “We just couldn’t get to an agreement. Again, the price was too high.””
    I wonder if they would find the price even higher when, as seems to be the case, all work at Boeing in Seattle runs out in the next 10 years.

  5. Gee whiz Scott, Boeing has been saying since November that LOU42 on the MAX was of no concern whatsoever, and that the IAM need not worry about 737MAX leaving Renton.

    I guess they were LYING.

    When they said the November offer was the last, I guess the LIED about that too.

    It goes to follow that if the offers from the various states were so good, they would not have even bothered. My feeling is that Washington’s offer is vastly better so BA played the game, responding to an offer that constituted an mere initial bargaining position with yet another last/best/final offer. It should have come as no surprise to the IAM, BA started playing this game in 2002.

    Now comes the show of guts, the battle royal, the Cage match…THUNDERDOME.

    Michalski VS Wroblewski. Who wins in tha battle of the ‘ski’s’? Certainly Tom has more to loose than Rich the knife. So it will be down to pure guts, and ability to judge right and wrong for Tom.

    My bet is: Tom caves. Once a coward, a coward unto death.

    I believe just a day or two ago, I said nothing good would come of these talks, and vote or not, I’m right.

    And back to 737, I have to say this is one analysis I cannot agree with you on. A stable model, facility and production line operating at high rates that Boeing absolutely depends on for both profit and cash flow, combined with having to sell at fire sale prices to beat airbus. They are going to do NOTHING to causes one added penny of expense. If they do anything, they will sell the wing operation as a package, but even that would be risky beyond belief.

    Your call on 777x is more probable. Sad but true, and I say let them go. Let them take 777x and leave. As a citizen of WA I’m weary of Boeing and it’s chickensh*t ways. Save Billions. And give it to business that create jobs and won’t take a dump on our evergreens.

  6. Boeing was asking for newly hired machinists in the union to have portions of their pension plan moved into a 401K style plan… not even the existing workers. But apparently even that was too much of a burden to bear, so they may wind up killing the whole deal. I wonder how their members will feel when the once thriving center of economic activity turns into a ghost town?

  7. many years ago – John McDonnel and friends made a promise to a Tulsa plant regarding production of F-15 parts. After the contract was awarded, claiming financial issues, the plant was closed. The hidden reason was to avoid pension obligations for the older work force. The case
    Case 4:94-cv-00633-TCK Document 258 Filed in USDC ND/OK on 09/05/01
    JAMES R. MILLSAP, et al.
    Plaintiffs,
    MCDONNELL DOUGLAS CORPORATION,

    it turned out that several executives were caught in a lie- that they knew at the time the work would be moved elsewhere. But by the time it worked its way thru the courts, Boeing was “bought out ” by MDC and the largest shareholder wound up on the BOD.
    …7. Plaintiffs brought this class action alleging that MDC violated Plaintiffs’ rights
    under ERISA, 29 U.S.C. § 1001-1461. This Court certified this lawsuit as a class action of over
    1,000 persons who were formerly employed by Defendant when it announced the Tulsa plant
    closing. Plaintiffs claim that MDC closed its Tulsa facilities for the purpose of depriving
    Plaintiffs of benefits covered by ERISA, in violation of section 510 of the statute.

    ..9. On June 20, 1990, John McDonnell issued a memorandum to all employees
    entitled “The Hard Reality.” In this memo, Mr. McDonnell informed MDC employees that the company needed to reduce annual expenditures by $700 million a year. These expenditures were
    to come from all segments of the company and, according to the McDonnell memo, would
    include reductions in force that would affect the company’s employees, of which there were then
    about 130,000 worldwide.
    10. In 1991, MDC became concerned that its orders for production of the F-l 5 fighter
    jet had diminished to the point that there was a possibility the production line could go dead.
    While the company worked on the remaining orders from the United States Air Force, the Saudi
    government in 1991 expressed an interest in placing a substantial order for F-15’s. The $9
    billion Saudi order was of significant interest to employees at the Tulsa facility, where the F-l 5
    aft-tail section for the planes was assembled, as well as the entire Tulsa community. The
    contract, however, was contingent upon approval by the United States Government in two
    respects: first, the President of the United States had to approve the sale, and second, the U.S.
    Congress thereafter had 30 days within which to pass a resolution overturning his decision.
    11. In 1991 and 1992, Oklahoma’s political delegation had considerable influence on
    defense matters. MDC personnel would later describe Oklahoma’s delegation as follows:
    “Oklahoma’s public officials as a group make that state perhaps the most potentially dangerous
    politically.” Pltfs. Tr. Ex. 71, M152 003 0859.
    12. In order to gain the political support it needed to win approval of the F-15
    contract, the company repeatedly represented that MDC would preserve the jobs of its Tulsa
    employees if the F-l 5 sale was approved by the government.

    —–

    13. Such representations were contained in MDC’s 1991 Annual Report, which stated
    that award of the F-15 Saudi Arabia contract meant the preservation of “7,000 jobs” at the
    company:
    Saudi Arabia expressed an interest in 1991 in expanding its F-15 fleet with the
    purchase of additional 72 Eagles. U.S. Government approval of the Saudi request
    would extend production of the F-15 to 1997 and preserve 7,000 jobs at MDC and
    another 33,000 jobs at subcontractors and suppliers nationwide.

    56. Plaintiffs’ statistical expert, Leonard Cupingood, found the average age among
    Tulsa hourly employees was 50.95. That average age was the highest of the facilities reviewed
    for possible shutdown. Similarly, the average age of the Tulsa salaried employees at year end
    1993 was 49.27. That average exceeded the average age of the salaried work force at MDC’s
    other plants. Tulsa also had salaried employees with the highest average length of service at
    18.71 years. As for hourly employees, Tulsa had the second highest average years of service,
    second only to the Torrence facility, where the average years of service was 22.65 years
    compared to Tulsa’s 19.68 years.
    15
    __
    To shorten the story- MDC closed the Tulsa plant

    John MCD got a seat on the Boeing Board

    232. The record further reflects a corporate culture of mendacity, as evidenced by the
    testimony of plant manager Mr. Bittle and the disregard for the truth evidenced by the testimony
    of CEO John McDonnell. As the Court observed during the trial:
    We have sat here for two weeks and listened to testimony that I think at some
    places is almost knee buckling in the way in which it evidences an abject
    disregard for people’s representations, people’s representations to their
    employees, their teammates, people’s representations to the public, people’s
    representations to public officials. We have other kinds of testimony: Mr. Bittle
    himself indicating he believed himself to be an unwitting instrument of fraud on
    the employees and the public; I think that the notion of engaging in negotiations
    that are known to not to mean to go to anything; and the ultimate question of
    closing a plant, recognizing the broad latitude the company has under the law, it’s
    entirely appropriate to review the numbers as long as improper numbers are not
    considered; but to hear testimony that there was never even consideration as to
    whether there were commitments, express or implied, to employees, to the public,
    to public officials…

    234. The Court further finds that Defendant’s actions evinces a history of mendacity as
    seen in the pattern of bad faith conduct in which it participated in the events leading up to the
    lawsuit. At trial, Mr. Juliano admitted under oath that MDC sought to short-circuit lease
    negotiations and was well aware that his conduct rendered those negotiations to be in bad faith.
    The Court adheres to its conclusion at trial:
    Sending somebody to negotiate a lease when in fact they can’t negotiate the time
    of day, and yet to pretend that you’re negotiating a lease goes beyond bad faith
    negotiations, it’s abject dishonesty.

    ++

    Wonder if old habits die hard – I certainly hope not- but the similarity seems erie and almost deja view. How many loopholes in so called LOU ?
    What is a ‘ guarantee of jobs for xx years worth?

    And at the center of the whole mess – Pensions !!

    • I’m sorry Tex but you are incorrect. Everybody would have lost pension accruals and been switched over to the 401 style plan in 2016. If you were an older employee, but not yet 58, you would never make up in contributions to the new plan what you lost under the old one, not unless you had hedge fund like trading skills and the market continued this idiotic, fed pump induced bubble.

      • Actually- the whole game on pensions and accruals is much more complex than most employees and virtually NO outsiders realize. It is true that in Oct 2016, everyone then in the plan will stop gettting credited service. But the benefits accrued at that date will be vested. The problem comes with those who cannor due to age or situation retire on or by that date. While they get a so called boost in 401k $$- there are a *pot full of regulations, fees, choices not available and IRS regualtions as to withdrawal to work with- to say nothing of stock market risk. The BA proposed numbers are cherry picked to be optomistic as to long term gains.
        generally- defined benefit plans are back loaded ( meaning the real payoff in $$ happens near the end of career ) and the argument that 401k stuff favors a mobile workforce is a valid point. I’ve been there on the details of the issues involved.

        So the game of every negotiation has some losers and some winners boils down to the indivudual ” it depends” and “YOUR milage WILL VARY ”

        AS to the number of defined benefit plans – as of a year or two ago there were over 45,000 such plans still going on according to WSJ a few days ago.

        extract …Rising stocks are the most important reason pensions are recovering. That aid may not last if the market slips from its current record level, of course. Such volatility in returns and funding levels is a big reason companies are looking for an opportunity to freeze pension plans and move the risk off their books. Until 2008, corporate funds were generally funded at more than 90% of their obligations, and they reached as high as 130% of obligations in 1999. But recent low interest rates and stock-market troubles from the financial crisis have been a challenge.

        The improvement in funding comes as fewer companies offer traditional pensions in favor of 401(k) programs. There were 45,258 so-called defined-benefit plans—those that provide traditional pensions—offered in 2011, the latest year data are available from the U.S. Department of Labor, down from 46,859 a decade earlier…

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