Thoughts on the Boeing-IAM deal

We couldn’t be more delighted.

The agreement announced Nov. 30 between the IAM 751 local and Boeing is an outstanding development.

Who wins? Basically, everybody.

The Company gets:

  • Production stability through most of 2016 without the pain and agony of protracted negotiations and all the uncertainty associated with this process;
  • No-strike through most of 2016;
  • The NLRB case goes away., by all indications. How this specifically relates to Charleston and the Surge Line remains to be seen;
  • A contented workforce; and
  • Stability for ramping up production of all the 7-Series, most particularly the 737.

The union gets:

  • The 737 MAX;
  • More work on the KC-46A tanker if Boeing Wichita closes;
  • An economic package with no apparent “take-aways;” and
  • No stress over contract negotiations or a strike.

Customers get:

  • No strike;
  • No interruption of deliveries; and
  • Certainty over deliveries.

Suppliers get:

  • Pretty much the same thing as customers.

Washington State gets:

  • The 737 MAX and all the jobs and supply chain benefits there from.

Losers:

  • Everybody else who salivated over the prospect of winning the 737 MAX, but more or less you don’t miss what you don’t have; and
  • Airbus: it can ‘t play on the uncertainty of a Boeing strike and delivery reliability.

We’re delighted management and labor set aside the antagonism of the decade-and-a-half and all the testosterone that went with it and realized that a partnership is more beneficial than being in their corners ready to fight.

A note of interest: Boeing Commercial Airplanes CEO Jim Albaugh was asked at the Credit Suisse conference Wednesday morning about the prospect of labor negotiations next year. (This during the 8am hour, EST.) Albaugh, in his characteristic understated way merely opined he was optimistic a successful negotiation could be achieved.

Six hours later, the deal was announced.

21 Comments on “Thoughts on the Boeing-IAM deal

  1. I agree that this is good news for everybody except Airbus but this is fair ball 😉

    Well done Boeing & its staff.

  2. I did not often have the opportunity to congratulate Boeing’s upper management recently. They have taken me by surprise here, and I applaud this totally unexpected development. Congratulations to all parties involved.

  3. Time for the IAM to put their burn barrel picket sculpture into storage and commission a new one with happy people waving 5000 dollar checks. I’m glad to see some normal people get to share in the profits for their hard work.

  4. “Losers:
    • …
    • Airbus: it can ‘t play on the uncertainty of a Boeing strike and delivery reliability.”

    Airbus has nothing to with this. Cheap shot at the competitor?

    • I agree, there is no need for it. Airbus does not base they operating plan on the hope that Boeing will stumble due to a strike action. Out of interest Scott, do you have an example of when Airbus ‘played on the uncertainty’?

    • Airbus just recently finished bargaining with their workforce in Germany.
      The result seems to have been satisfactory for all involved.

      Compared to Boeing Airbus seems to have more synergetic workforce
      relations.

      The now found Boeing / Union agreement runs out before MAX EIS?

    • Doesn’t anyone besides us remember Richard Branson’s hissy-fit about the strike-delayed 777s and his threat to buy Airbus instead?

      • Done more in exasperation over childish behaviour ;-?

        Strikes as such are probably not determining buying decissions.
        On the other hand Immature management behaviour
        is certainly something that is looked at.

      • Ohhh dear, a hissy-fit is used as an evidence that Airbus is a loser in the Boeing/IAM deal? Scott, i have a feeling your account had been hacked by fleetbuzzeditorial…

  5. There are no losers, you cannot lose what you never had applies to Airbus as well as alternate sites.

  6. While that is true, Uwe, the MAX should be well on its way towards certification, and very possibly in flight testing by Sept. 2016.

    Beyond the B-737MAX, I think this agreement can have major implications towards the B-777X, which, by 2016 should be well into the design phase. That is more of a concern to Airbus than the MAX production is, at least right now.

    • My understanding is that the IAM is the relevant party for shopfloor/production workforce relations.

      Developement doesn’t really play into this. ( Boeing tried to give the appearance when announcing delays as caused by the strike. But that was simply not true imho.)

      • You are correct, Uwe. The IAM does represent most of the shop/production employees. Those engineers who will be doing the design work on the B-737MAX and B-777X are mostly represented by SPEEA, the Society of Professional Engineering Employees in Aerospace. Since the IAM got a contract extension, with some new benefits, I expect Boeing to talk to SPEEA and give similar concessions in exchange for a contract extension, or a new contract.

  7. I forgot to mention, I think the B-777X could have an EIS in 2018 or 2019. But to do that, Boeing has to make an announcement soon to launch the program. Perhaps some encouragement from EK might help?

  8. I think the prospect of at worst one month delay due to strike is nothing you can threat an airline into a multi-billion USD contract.

    I would put Airbus on the winner side instead: with production of all current models more or less locked in Washington State, Boeing has no major lever for reducing its cost of production. Therefore the competitive landscape remains constant. Airbus probably more in fear of a Boeing that aggressively reduces its labor cost by 10 or 20% by going somewhere else (in the United States). I think hordes of “Lean Managers” have wrung the long established B737 and B777 lines of any possible cost reduction opportunity.

    Airbus and Boeing both have comparatively high labor cost (in relation to other manufacturing business in respective countries).

  9. Schorsch :
    Airbus and Boeing both have comparatively high labor cost (in relation to other manufacturing business in respective countries).

    I do not have data but gut feeling is that if you consider labor cost as percentage of product margin it is not bad at all.

    • I agree. But the salaries paid at Airbus or Boeing are higher than you could get when engaging in similar jobs in the same region. I don’t consider it a problem, but Boeing more had an option than Airbus to reduce the cost by moving inside the USA. Airbus is pretty much locked. Unions (in Airbus) in France and Germany are strong, but curiously in Germany they hardly go on strike (in France they do).

      • I can’t speak for France. In Germany the workforce representation is not directly done via the unions
        and happens under a formal framework. Google for
        “Mitbestimmung”. As the workforce thus has quite a bit
        of say in how the place is managed there is less reason
        for going heads to heads and trying to force results by strike.

        Payment tarifs are basically bargained on an industry wide
        basis. Pensions and health are organised independently.
        This removes the chance for possible shenanigans and the danger of major losess in pensions from the bargaining agenda ( same as healthcare, schooling, ..).
        Job qualification is formalised too and founded broadly.

        The average worker in Germany is qualified and dedicated enough to be “worth his money”. One reason a lot is automated or uses complex ( but preferably flexible ) tooling to aid in manufacture.

  10. Washington State’s future for Boeing Manufacturing has had a great year. The 767 tanker win, closing in on two hundred yearly orders for the 777, and the MAX which could be a five thousand aircraft program.

  11. Really fantastically good news, for Boeing, the IAM/SPEA, the 737MAX/777X
    programs, the greater Seattle community and the USA in general!

    Why couldn’t they have come such an agreement BEFORE Boeing decided
    to open the S. Carolina 787 assembly plant, for whatever reason?

  12. I’m curious about the statement “More work on the KC-46A tanker if Boeing Wichita closes”
    Wichita is also a union site, and closing it means moving the finishing center work to another site or state (not necessarily Washington). How is this good for the union overall? and doesn’t this carry some political baggage.

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