Implications of IAM-Boeing talks on 777X (Updated 11am PST Nov. 5)

Update, Nov. 5, 11am PST: The Seattle Times has this update of the secret talks (well, not secret any more) between the IAM and Boeing over the site location for the 777X. Boeing wants health care and pension costs cut. These were key issues in the SPEEA contract negotiations (in the end, pensions were shifted from defined benefit to 401(k) for new employees but health care cuts were saved for another day).

When the health care and pension plans came under Boeing attack in the SPEEA negotiations, behind the scenes the IAM was said to be already planning to gear up to hold the line when the current contract expires in 2016.

The Seattle Times report also includes some reaction to the leaked terms.

Original Post:

The news that the International Association of Machinists has been engaged in secret talks to win Boeing’s site selection for the 777X for Everett (WA) carries implications beyond the obvious jobs, economic benefits and Washington vs South Carolina rivalry.

Reuters broke the story. The Seattle Times has more detail.

As readers of this column know, we’ve suggested that the Washington Legislature consider making the State a right-to-work state. Understandably, this suggestion hasn’t gone down well with IAM 751, the local here in Puget Sound, with SPEEA, the engineers’ union, or with Gov. Jay Inslee, a Democrat with close ties to the unions.

We have urged this consideration because Boeing has been moving SPEEA jobs out of state and has leveraged South Carolina (a right-to-work state) against Washington.

If the IAM and Boeing reach an agreement to extend the current contract from 2016 to the mid-2020s (we believe 10 years to 2026 seems to make sense), assuring Boeing steady production, many of the issues facing Boeing that enable it to leverage RTW over unionized Washington become moot.

RTW has been a sword wielded by Boeing over the IAM and Washington. It has been a sword of Damocles. The IAM, typically a highly militant union, took an enlightened approach two years ago when it extended a contract in place by four years in exchange for Boeing selecting the Renton (WA) plant for the final assembly line for the 737 MAX. This prospective 777X deal would carry this innovative approach further.

Secondly, we have heard–anecdotally to be sure–that customers are concerned over the prospect of Boeing Charleston being selected because of the history of quality control challenges from this 787 assembly site, preferring the proven history of Everett’s quality control.

Next up, SPEEA is now faced with coming to a peace agreement. After a highly contentious contract negotiation last year, culminating in an odd set of ratification votes early this year, Boeing has systematically moved SPEEA jobs out of state. As the weaker of the two unions, SPEEA needs to use the example of the IAM to tone down the rhetoric. We know conversations are underway. We don’t know what direction they are taking, however. But if SPEEA can follow IAM’s example, aerospace in Washington State will be able to look at the future with more confidence.

The trick will be for Washington politicians to avoid becoming complacent, as it has time and time and time again.

14 Comments on “Implications of IAM-Boeing talks on 777X (Updated 11am PST Nov. 5)

  1. Interesting you are again and again framing the story as if it were the unions who are reckless and need to become reasonable, to tone things down. Yet you say customers aren’t thrilled with the board plans, from that it would seem it is the executives who are taking the company hostage, making threats without regard how it will affect the company.

  2. SPEEA and the IAM are reckless, nn. Combined they have cost Boeing millions to billions of USD in lost production due to crippling strikes. These unions believe they, and they alone have the ‘right to work’ for Boeing.

  3. Well, there have to be at least two sides to make a strike happen. Not to mention that millions to billions is still order of magnitude lower than what the management was able to brought upon the company just with the 787 program.

    It’s funny to think that employees, who are dependant on successful Boeing to pay their mortgages or kids college fees, are adamant to destroy the company, while the executives, who are secured and can live lavish life to their death without lifting a finger again even if Boeing completely blows up tomorrow morning, are fighting for Boeing’s better future.

  4. IMO – there is a more subtle agenda re a longer term contract. Its called the ACA or Obamacare. By this time next year- the effluent hits the turbine re company provided healthcare- mixed in with union contracts, and so called grandfather clauses. which aren’t. Add to it the pension mess wherein SPEEA inaptitude- incompetence managed to hose all future members of the bargaining unit with a 401k instead of a real pension.

    The company now has a lot of leverage with both SPEEA and the IAM.

    Technically- the unions themselves could drop Agency fee at almost any time- but are unlikely to do so due to an expected plethora of free-loaders who get all the benefits and protections of a contract, union services- protection against bullying supervisors, etc. at no cost.

    There is no doubt that SPEEA ( read Goforth and a few of his lackies on Staff and E-board ) managed to detonate a low yield foot – nuke during the last negotiations. The scare tactics- the FUD re pensions and the SS covered compensation bpucky plus the social-justice rhetoric did not go well with either the members or the company.

    OTOH, the IAM, despite the anti union garbage floating around, has a much better handle on reasonable negotiations and rhetoric.

    Even so, the anti-union victory at any cost types in the Chicago Offices are still in charge.

    Ray Conner is now in the same position as was Alan M almost a decade ago- having to be the mouthpiece for the Chicago-GE- MDC crowd.

    I hope he survives.

  5. There’s a cost to move the 777 line which can’t be cheap. I don’t really see them doing this for a 400 to 500 aircraft run.

    • I do – I have some friends who survey labour relations in both the US and here in Canada. They say that in the US there are some executives who are ‘malignant’ against the ability of employees to organise, regardless of effect on company. I have no idea whom is being referred to but suspect from previous comments here and elsewhere that Boeing may have become a case in point. It is not that Canadian ones are ‘nicer’ but rather that Canadian labour laws and jurisdictions are more robust in terms of enforced settlements or arbitration.

      • True, but the MAX line stayed in Renton and the stock price is up. Move the 777 line to SC and watch the stock price drop, just a prediction. Not the kind of management the stockholders are looking for. Keeping the 777 line in WA is a rational economic choice, and that still counts for a great deal.

  6. I used to work for a Japanese company – Mitsubishi – that had company-wide Labor and Engineering Unions that made SPEEA and the IAM look pathetically weak. Nevertheless, Mitsubishi management worked with the Unions, and everyone was very productive.

    Likewise, I used to work for a company that collaborated with EADS reps – and learned that EADS also had strong Engineering and Labor unions. Nevertheless, there were really no intractable problems that I heard about, and the EADS guys were smart, hard-working SOBs. .

    No…only in America have I seen such an antipathy – such a visceral hatred – of organized Labor. Europe and Japan seem to accept Labor Unions and work with them….but not in America. In America, most everyone thinks he’s an effective free agent who can tell the company to “bug-off” if he doesn’t like the terms of employment and readily find another job with another company. People spout the meaningless “Right to Work” slogan while ignoring the fact that this slogan does not give them the right to a job. There’s a lot of unemployed people in America who think this way – and are too proud to admit they sided with a losing cause, and they are not as “in-demand” as they thought they were.

    Meanwhile, American industry continues to sink and offers fewer and fewer new jobs and lays off a lot of 40-50 year-old workers whenever they get the chance (it keeps the payrolls low). And the Unions are still blamed for the malaise. And the only thing that seems to really matter to the corporations is “Winning” the war on workers – even if it comes at the expense of market share, reputation and even profit. It’s a self-perpetuating race to the bottom with no end in sight.

    So, have fun and Flog the Unions while they are still around. You can nail them to a cross of Labor Contracts and spit on them – and perhaps this will provide the cathartic release you need to justify the never-ending malaise. Just don’t say you weren’t warned.

    • If Americans and their unions ever achieve to have voting representatives of the unions on the boards of directors of large companies, then they have learnt that cooperation costs a lot less than confrontation and guarantees a very productive work force.

  7. Well the cat is out of the bag

    Originally published November 5, 2013 at 11:05 AM | Page modified November 5, 2013 at 3:49 PM

    Machinists to vote on Boeing proposal for 777X
    Boeing is offering Machinist union members a new contract that will secure all 777X work for Washington state — if they agree to reduced long-term pension and health-benefit costs.

    By Dominic Gates
    Seattle Times aerospace reporter

    The Machinists leadership agreed on Tuesday to take to its members a Boeing proposal that takes away some cherished union benefits but ensures local workers will fabricate the forthcoming 777X’s giant wings and assemble the plane here.

    The agreement means members of the International Association of Machinists (IAM) will vote next week on a new eight-year contract with big cuts in future pension and health care benefits.

    Union members will earn a $10,000 signing bonus if it passes, payable within a month.

    goes on . . .

  8. I have no personal stake in this contract. However, my son stands to lose up to 1 million over the course of his career which started only a couple years ago. By erasing the pension he’ll loose in today’s dollars @ $91 per month per year of sevice. If he works 48 years, he’ll be 67. If he gets the current pension he could get 786k in 15 years by age 82. If they change the years to max out in pay grade from current 6 years to 16 years, it’ll cost approximately 10/hr x 10 years or about 200K. Not to mention the healthcare cost increases, easily a million. And the company want to by this with a 10k bonus and a tiny bit more 2% toward the 401k which they already have. Seems like far too many concessions for the younger workers, when the older ones 58 and older can clean house of the pension fund and get $95/mounth per year with full benefits. Also seems strange to negotiate a new contract when the current one has about 3 years left. Boeing didn’t just dream this contract up the other day.

    • Its not as bad as you think- investigate the alternate benefit formula along with the base rate for baseline and don t forget to add in the estimated returns on then 401K matches, etc.

      Trying to project that many years ahead is fruitless

      I’m not saying its a good deal- but I suspect you have not read or understood the current BCERP plan and why the dates/months in 2015 and 2016 are important re credited service.

  9. IF BA has supposedly agreed to the LOU (as proposed by the IAM ?)- copied below.

    If a second contract extension is approved by the bargaining unit on or before November 13, 2013, the Company agrees to locate the 777X wing fabrication and assembly, and final assembly of the 777X in Puget Sound. Below is the language proposed as a Letter of Understanding.
    Letter of Understanding No. ___
    777X Work Placement
    If a second contract extension is approved by the bargaining unit on or before November 13, 2013, the Company agrees to locate the 777X wing fabrication and assembly, and final assembly of the 777X in Puget Sound.
    The Company will perform the final assembly of the 777X including 777X-8, 777X-9, and 777X-Freighter in Everett. The 777X wing fabrication and assembly work will be performed in Puget Sound. The parties agree that the Company may subcontract or outsource certain 777X wing fabrication and assembly work packages, in whole or part, in order to create capacity for other 777X work packages in the Puget Sound facilities, and/or to efficiently utilize those facilities to accomplish the production and assembly of the 777X.

    Except as expressly provided, nothing in this Letter of Understanding supersedes or impacts any right of the parties under the 2008-2012 Collective Bargaining Agreement and the 2012-2016 extension to the Collective Bargaining Agreement, including but not limited to Article 2 and Section 21.7. Nothing in this Letter of Understanding will impact the Company’s right under Section 21.7 of the Collective Bargaining Agreement to make strategic work placement decisions associated with a condition of sale or market access, and to subcontract or offload work due to lack of capability or capacity, to subcontract or offload work to prevent production schedule slippage, or to temporarily subcontract or offload work due to emergent short term needs. Additionally, except as expressly provided, nothing in this Letter of Understanding will extend the duration of Letter of Understanding 42 (on Work Placement re 737MAX, tanker, P-8 Production, Everett Wide Body Airplanes, Supplier Warranty Work).
    This Letter of Understanding will become effective on the date that the second contract extension has been ratified by the bargaining unit.
    Dated: November 13, 2013

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