SPEEA, the engineers union at Boeing, and the company appear to be at odds in the early stages of contract negotiations and there appears virtually no chance of a surprise breakthrough similar to the IAM 751-Boeing contract last December.
People familiar with the situation on both sides say they are hunkered down for traditional contract negotiations in advance of the October 4 amendable date.
SPEEA suggested in June 2011 that both sides go to binding arbitration as a first, not last step as a way to speed up a contract and avoid protracted, potentially contentious negotiations. Boeing declined, according to SPEEA and confirmed by a person familiar with the Boeing position. According to two sources, Boeing didn’t want to give up decision-making to a third party. Boeing also didn’t see the urgency or need to avoid normal contract negotiations, according to the person familiar with the Boeing thinking.
SPEEA has publicly detailed its side of negotiations on its web site. Its Executive Director, Ray Goforth, also gave an interview with the Puget Sound Business Journal that was posted July 30. The Everett Herald has this story.
Boeing isn’t saying much of anything, though it did give some brief statements to The Herald. Boeing’s tight-lipped approach is in sharp contrast to the very public 2008 contract negotiations with the IAM. At that time, Boeing was accused by the union leadership of negotiating in the press and on a dedicated website, trying to go over the head of the leadership and negotiating team directly to the membership. Management felt that its offer was so attractive that members would vote “in their own best interests” once they received what Boeing felt was a fair understanding of the terms of the offer.
Executives were stunned with more than 80% of the members voted to reject the contract offer and authorized a strike. The members walked off the job a few days later for 57 days.
SPEEA, which has struck only once in the last 10 years and then for only a couple of days, is considered by all parties and observers to be less militant and less likely to strike than the IAM 751.
There is also no pressing issue to come up with an IAM breakthrough as there was last December when Boeing was holding hostage the assembly site for the 737 MAX. Although there was near-unanimous opinion that assembling the MAX anywhere but Renton, where the 737 NG is assembled, was looney, it was clear corporate headquarters in Chicago was going to hold out this possibility over 751’s head. Common sense prevailed on both sides and after secret negotiations, the company and the union announced they agreed to extend the contract by four years, well in advance of the September 2012 amendable date.
The agreement was heralded as a new era in labor negotiations. Until now.
SPEEA is clearly engaging in a public campaign over current contract negotiations. Boeing, according to a person familiar with the company’s thinking, is content to let negotiations run their course.
“We offered to simply extend our current agreement,” Ray Goforth, SPEEA’s executive director, tells us. “Boeing rejected this and is talking across-the-board cuts. Boeing refuses to give us a proposal (we gave them a complete proposal in June)…..but what they’re talking at the bargaining table is:”
Elimination of pension for new hires and replacement with a 401k that pays 40% less benefit according to Boeing’s own pension actuary.
We’ve responded that we understand their reasons for wanting to eliminate the pension but we can’t even begin to entertain such a thing unless we’re talking about a replacement vehicle funded well enough to provide an equivalent retirement benefit Even then, unwinding the pension is horribly complex and would take time and process to jointly work through the issues.
Boeing wants at least a 40% reduction in the rate of salary growth. This means reducing our salary pools from 5% to 3% or lower. Because of a thing we call leakage (higher salaried employee’s retire and are replaced by lower salaried new hires) a 5% salary pool in reality is actually only about a 3% payroll cost. So Boeing wants to reduce actual payroll growth to somewhere between 0-1%.
Our engineers are currently 1-2% below the 50th percentile for high tech manufacturing (they’re currently paid below market). Our techs are about 1-2% above the 50th percentile but there are some apples and oranges problems in that comparison (Boeing uses techs in a much more sophisticated way than many of the comparators).
Boeing left the machinists 18% over the 50th percentile for their market in their last contract. Boeing’s ideas would drive the engineers in particular under the 50th percentile. That’s a bitter pill to swallow for engineers who feel that they saved Boeing from a 787-driven bankruptcy.
We’re probably closest on medical. Boeing wants to instill consumerism and healthy lifestyle choices. We agree in concept. We want carrots to drive such choices. Boeing wants sticks…..plus a big cost shift just for the heck of it (a net increase of 18% in costs to our members).
So the summary is 40% less retirement benefit; 40% less salary growth; and 18% increase in medical costs.
“At a time when the CEO compensation just increased 30%, the shareholder dividend just increased, and the company has a record order backlog this is perceived as an obnoxious bargaining stance,” Goforth says.
For its part, Boeing is remaining tight-lipped. It’s known that Boeing wants to mimic some of the pay-and-benefits to SPEEA to that provided non-union, management personnel. Boeing is also sticking with its preference for having a fair number of engineering contractors, saying that in the event of layoffs the contractors would be the first to go. SPEEA believes the contractors should become employees (and SPEEA members).