Leeham News and Analysis
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Leeham News and Analysis
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IAM may well “blow it” over 787 Line 2
With an historic opportunity to engage in a radical shift of labor relations with The Boeing Co., the International Association of Machinists may well make an historical decision that will “blow it.”
As anyone in aviation who is interested in commercial aviation knows, from the plethora of news reporting in just the last 24 hours, the IAM national union and Boeing have been engaged in secret talks (yes, they have been secret, despite a denial to the contrary) to attempt to achieve an unprecedented 10-year contract with a no-strike clause. As Dominic Gates of The Seattle Times reported yesterday, these have deadlocked.
An ominous report comes from Charleston’s Post and Courier in which local elected officials are already under a confidentiality agreement from an unidentified major aerospace company.
The Seattle Times, by reporter Gates again, today goes into detail about why Charleston could win Line 2. Glenn Farley, the well-connected aviation reporter for KING 5 TV (NBC-Seattle), has this interesting report that provides additional detail over what the two sides have been talking about.
The IAM Puget Sound local 751 hasn’t been more than peripherally involved in the talks, which have been conducted between the company and the IAM National leadership headquartered in Washington (DC).
On the quarterly earnings call Wednesday, Boeing CEO Jim McNerney said that talks between the IAM National and the company had been constructive and that a decision where Line 2 would be placed would be made within a few weeks. He did not mention that no further talks were scheduled nor that they were deadlocked, probably not wanting to inflame the situation, as Gates would report less than 24 hours later.
Boeing’s Board of Directors meet next week. A decision could come as early as then. Permits filed by Boeing to begin clearing land in Charleston have a November 2 start date.
The stories by Gates and Farley indicate where some critical agreements have been reached and where there remain some stumbling blocks. Gates’ story Thursday reported that the IAM National wants a guarantee that Boeing will not only place Line 2 in Everett, where Line 1 is, but also to guarantee that the replacement airplane for the 737 will be in Puget Sound (the Seattle area). Considering that a decision on doing a replacement airplane probably won’t be made until 2013 to 2015, during which time any number of things entirely unrelated to labor could happen to influence this decision, Boeing isn’t willing to provide this guarantee (and properly so, in our opinion, however much we’d like to see the plane stay here). There are other demands by the IAM that have not been publicly detailed that are also stumbling blocks. The 737 guarantee and these other demands may well kill Line 2 for Puget Sound.
The IAM isn’t in a position of strength here. It is in a position to thoroughly disrupt Boeing’s production in retaliation over any decision to place Line 2 in Charleston, as we outlined yesterday. Boeing has said repeatedly that it plans to bring back “in-house” more engineering and production responsibility for the 787-9 as a result of lessons learned on the 787-8. The questions are “how much” engineering and production and where “in-house” is, Puget Sound or Charleston.
IAM 751 has a graphic illustration over the “disappearing airplane,” representing the jobs lost to the IAM over the decades as Boeing has outsourced more and more of its airplane production to non-IAM shops, whether in the USA or outside the US borders. The IAM National has a critical decision to make, and it has very, very little time in which to make it. Being hard-ass will cost IAM 751 specifically and the IAM generally more jobs. Being reasonable will save IAM jobs and create new ones.
Unfortunately, the long-term history of the IAM is that leadership seems more concerned about “victories” for the cause than it does about jobs on the ground. We fear the IAM is going to blow this historic opportunity.
We’re going to watch how things develop over the weekend and in all likelihood will revisit this on Monday, the start of a critical week for Boeing, the IAM, Puget Sound, Charleston and American aerospace.
I’m not sure what “blow it” means at this point.
There is no legal and binding way for the IAM to act in two weeks. None. To do so would violate federal labor laws.
Next, should we expect total capitulation by the IAM? Might be nice, but we are talking the real world here. That expectation isn’t reasonable, and from the IAM’s point of view I think, not in it’s members best interests to let Boeing have it’s way with them for a dozen years for what is for them, not much.
This is no mistake. It’s not “blowing it”. It’s the same sort of decision the Governor made when she decided no more largesse for Boeing. I’m sure the union is saying to itself, ‘no more something for nothing’. Put yourself in thier shoes, and it’s a no brainer. Three years from now they will still have everything they have now essentially, the economy will have recoverd and the aerospace cycle will again be on the upswing. Not a single 787 will have taken flight from Charlston, and all commercial revenues will still be coming from Everett and Renton. Boeing’s cash position will not have improved much, it’s credit will probably be less that it is now, as will it’s defense business.
And a highly ticked off union will be in the position of strength with it’s leadership having massaged sentiments for thee solid years.
Three years from now they have the opportunity to strike again. Would they have a better shot at something meaningful over rolling over now? Probably. What do they gain for what they potentially give up? A second 787 line that could still be outsouced even more heavily. It’s doesn’t even have to stay in Everett. No guarantees on a 737 or 777 replacement, nothing. Just an obtuse promise of the second line.
The taxpayers of Washington paid off Boeing for the 787. Now Boeing chooses to ignore that episode, and violate the spirit if not the letter of that agreement. Why should the IAM give up it’s only weapon?
All that of couse is meaningless conjecture, because there were never serious talks taking place, and the union can’t do a thing without the rank and file’s consent, and a vote takes weeks to arrange.
So what this all is is simply a last ditch attempt to browbeat the union into giving up everthing for twhat they have to view as nothing. Boeing has nothing at all to lose by trying it, regardless of where line 2 ends up.
For months we hear from McNerney that the line 2 decision would be made at years end, then suddenly, out of nowhere, it’s two weeks hence? Am I expected to beleive that something isn’t being orchestrated here?
As to retaliatory disruptions, I think that notion is overwrought. Boeing’s main union has no history such slowdowns or disruptions, and they are contractually forbidden to wildcat. They seem to prefer to wait untill a contract expires before causing any problems
Make no mistake. This is all a big sham. There is no deal being cut. No offers being made. It’s going to go however it goes, and the Union really cannot influence the outcome without essentially destroying itself. From thier view THAT would be blowing it.
Once again it appears that compromise would be the best solution…how about a 5 year contract as a starter for the 2nd line promise.
That enables Boeing to get production up and bring things in house and it still gives the Union something to negotiate at a leter date
Very good assessment of the situation IMO. Boeing couldn’t possibly guarantee the 737RS in Washington state; far too many unknowns at this point as you point out. For the IAM negotiators to risk their members’ future over this would be irresponsible beyond comprehension.
This is a once-in-a-generation opportunity for a serious “win-win”. I hope both sides take advantage.
Your point that: “Unfortunately, the long-term history of the IAM is that leadership seems more concerned about “victories” for the cause than it does about jobs on the ground…” is spot on. Its almost as if they are too young to remember Eastern Airlines.
As an IAM member in Everett, the take I have on this is that Boeing would be foolish to put their line in Charleston. Personally, I think they are bluffing just to try and win concessions from us for nothing. Plus, the damn plane has to fly and be proven airworthy first.
Also, its not like we want to strike every 3 years. Boeing has had every opportunity to negotiate fairly and responsibly, but continually chooses to take a hard position against the union. What it looks like is that by repeatedly forcing us to strike, Boeing makes it look like their unionized labor force is unsteady, when in fact it is Boeing corporate that is unsteady (and highly incompetent).
They think they can make us slaves. Is this why they “want” to move to a state that still flies the Confederate colors?
This whole ordeal is ridiculous. Most of us love building the best planes in the world and the company is just going to end up screwing themselves over in the end. -sigh-
Your missing the point and representative of the exact attitude of the IAM. Whether or not it’s the “correct” move or discussing the incompetence of management is irrelevant. They (management) will decide what do when they want do it. As Scott mentioned, the union is over a barrel and there is no way the union will win if it keeps this attitude.
Also, contrary to IAM beliefs, no on “forced” you to go on strike. You always have a choice. Then the grown up thing to do is take responsibility for ones actions, put it behind you, and work for a better solution for ALL parties, not just one unions members.
This affects all employees and this line needs to stay in Washington.
Note to Bloggers:
We are very uncomfortable with the injection of “slaves” and “Confederate flag” into this debate, for all the obvious inflammatory reasons. We pondered over allowing the above post to “go live.” The other points within the post are well worth discussion. But if anyone else steps over into racial tones, we’ll crack down and start editing or deleting or not approving future posts.
Scott Hamilton
The intent of my earlier post was simply to give another perspective. I did not intend to make people feel uncomfortable and I apologize if that happened. However, it made me realize that we NEED to be uncomfortable with certain aspects of what is happening. It was not intended to be racial in any way. Sorry if I hurt your feelings.
The Boeing Company does not seem to understand what they have in the Puget Sound region. We have the reputation for building the best commercial airplanes in the world. Our region is their brand– their identity. They will have to ask the customers if they want a South Carolina 787 or an Everett 787. I wonder which one they will choose. And if a line ends up in South Carolina, then where will they ship the next line, China? And what about the quality? The workers at the former Vought plant can’t even build a section of a plane right, let alone the entire thing. Imagine what would happen if we delivered planes without finishing them to exact specifications!
As union members we do understand that the company will do whatever it wants to do and that is inevitable. All we can do is get dragged along, kicking, screaming, and pushing giant piles of money out those big doors every day.
I’ve read the comments from union members here and elswhere extensively for the last few days. I cut through the emotions and the rhetoric and have come to a conclusion, maybe a summary.
The union’s number one fear, the number one thing they hate most, it outsourcing, foreign or domestic.
Thier choice is stark:
Refuse Boeing’s demand of a 10 year contract extension and lose the 787 second line and likely much more.
OR.
Give in to Boeing’s demand for a 10 year contract extension, gain the second line, probably only temporarily, and still see the loss of other programs and parts thereof. Probably everything eventually.
Simply put, union members don’t see Boeing sticking around regardless of what they do, so they aren’t going to do anything but get what they can now, and tell thier children, friends, and neighbors to steer clear of Boeing.
That’s the way they see the situation. They see it as hopeless and unfixable, even as thier union leaders try to save some jobs. They see Charlston as simply a rest stop on the way to China or Mexico, with who no America based workforce can compete on price.
It would seem an absolute and sad truth that Boeing’s worforce has no trust whatsoever in it, and that the only solution is for Boeing to offer some contractual guarantees regarding future work, something it apparantly and stupidly will not do.
I do believe the union wants a deal. I also believe that Boeing doesn’t want a deal, just the extension. This is obvious given the tight timeline Boeing has imposed. They know no deal can be struck, and no vote organized in two weeks. It’s all a sham.
Without some sort of concession from Boeing, there will be no agreement, and the end game, regardless of where line 2 ends up, is going to be very bad indeed.
I disagree entirely. I think both sides want a deal, and want it badly. However, the company finally has the wherewithal to negotiate from a double position of strength: (1) the general economy and the aviation sector are in the doldrums; (2) there is the second line. No company can afford to face a strike every three years and still keep their customers’ loyalty.
Mid-to long term, I recommend the IAM, SPEEA, and the non-unionized employees strive to take a serious equity stake in the company–well beyond 401K contributions.
Scott is correct when he notes the IAM is seeking “victories”. Was Eastern Airlines demise a “victory”? Was the last strike a “victory”? Time to change the model. Become owners, not just “stake holders”. Then they will be in a position to affect really mutually beneficial change. And maybe, just maybe, the company won’t only survive, it will actually prosper.
So after probably the dumbest, most catastrophic use of outsourcing in developing a new product any American company’s management has ever undertaken, Boeing threatens the union with … more outsourcing? At what point do the losses from this kind of decision-making outweigh the labor costs involved with dealing with the union?
Bring in binding arbitration. It works in other industries which need to avoid the use of a strikes as a negotiating tactic.
Binding arbitration is the only way a “no strike” agreement will work for either side. Inevitably an impasse will occur. This is probably the best remedy.
Boeing would never agree to binding arbitration in my estimation.
But let me further try to illustrate my theory that Boeing doesn’t want a deal.
First, what has Boeing offerd?
Well, nothing really. A promise of a second 787 line. For a time period indeterminate, under conditions that are no better than the current ones as far as outsourcing go. A promise that has no real enforcability. I’m sure that the Union is looking at what the state did to get the 787 in the first place, and how the state and Boeing have conducted themselves since on that very agreement.
On the face of it, the spirit of the agreement gives 787 to Washington in exchange for tax breaks and other incentives. With a move of the second line to S.C., not only is the spirit of the agreement breeched, but one could postulate the departure of the entire program eventually. I’m sure this was on the governors mind when she put a halt to any more lucre being cast at Boeing’s feet.
The second line…
If operating efficiently, thats what? 800 or so IAM represent jobs at best.
Not very much for a ten year extention making for a 13 year long period of time without a new contract for Boeing to worry about. What could Boeing do with 13 years? Develop and produce 777 and 737 replacements elsewhere. Finish the P-8 and 737 programs and close Renton. Finish and close down a tanker program. Esssentialy most operations could leave Washington, and the IAM would not be able to interfere except politically.
And again, I can’t get over the timing issues, and the fact that no agreement that could be voted on within the time constraints as set forth by Boeing. No agreement could possibly be accomplished, just as no incentive package via the State Legislature could have been acomplished without a costly special session.
The idea of the word “extention” has very little meaning to it. What about wages? Benefits? Work rules? All unchanged for 13 years? NOBODY is talking about what “extention” means. How do you negotiate for a reality that is a dozen years down the road?
You don’t, because there IS NO NEGOTIATION happening. Have you heard Boeing or the IAM mention any of this? Or do you really believe that the current contract is simply frozen and nobody gets a raise for 13 years?
C’mon people. Please wake up to whats happening here.
For the IAM international to be actually “bargaining” in the absence of direct involvment of the local IAM organization would be a violation of federal law. Further, the imposition of such an agreement without consent of the rank and file would never stand up under labor law either. Next, union elections under the same laws require notifications, waiting periods etc.
Look, this whole “negotiations” business is pure fakery.
Boeing had already decided to move 787 line 2. I firmly believe that.
So then why the act? Why are they playing the media for suckers, inflaming local politics, badmouthing it’s workforce at every turn?
They want to drive a wedge in between the union leadership, and it’s members. They want to break down that relationship, and that trust. In thier view the worst they will get is a more moderate union hierarchy, and at best, decertifaction.
Placing blame squarely on the union, using the media to hammer away at it’s members, to hopfully have everyone from State politicians to their neighbors hating them.
This is about causing not the loss of 787, but deep psychological wounds that Boeing will blame on the union, then offer to heal, absent the union.
This is the goal, this is the hope. It’s not about 787, that call was made a long time ago. It probably played a huge part in the decision to buy vought Charlston.
This if going to be grief, and nothing griefbut for Boeing, and more specifically, the shareholder. The State will get over it. We need to diversify away from Boeing, badly. And if BA ever hits 65 again, I’m done. For good.
I can’t outlast James McNerney. I’m sure the IAM is betting they can.
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You cannot impose a change in a relationship by force.
You can only impose you will upon the other party.