Holy crap. Here’s the story from The Seattle Times.
Tags: 777X, Boeing, IAM 751
YEA team- boeings games hit the fan
Do these people understand the frame of reference here? They have NO leverage of any kind. IAM is only capable of destroying itself slowly or quickly at this point. That’s not how it should be, I hate to see them lose their pensions etc, but that’s the way things are in 2013 America. The Professionals saw the writing on the wall during the last negotiation, but the message isn’t getting through to these guys. They’re going to blow it for us and I do NOT want to move to the south.
Any chance we can get 51% in the vote anyway?
Read the article:
“It’s disgusting,” said one Machinist, 58, who asked for anonymity, as did all of the rank-and-file members who talked to a reporter. “We’re willing to negotiate and sacrifice a bit. Meet us halfway and everybody will walk away with heads held high. Instead they are threatening us. The mood right now is that everybody is going to vote no.”
“We have to take this or lose the future of the Everett plant? We have a gun to our heads. A lot of people are very upset.”
I’m not surprised.
What Boeing are doing here goes in the face of everything in even the most basic set of “People management essentials” guidelines, which is why to me it seems like they are merely looking for an excuse to move the work elsewhere while laying the blame on the union.
If Boeing are actually bluffing and this is their negotiation tactics, they should maybe revisit “Negotiation tactics 101” along with “People management essentials”.
As for the union’s leverage, by the way: They do have some.
Namely the collective know-how and skills of the Everett workforce. Those are a lot harder to come by than management – not just at Boeing – seem to (want to) believe. However, when somebody has a PowerPoint deck that suggests the company could save $35 a year by moving work elsewhere, common sense often goes out the window.
The astounding thing to me is that Boeing really should know better given their experience with the 787.
Scott, Have you have any shorter posts, that said so much?
I’m not surprised, Machinists are angry, very angry.
Since the main sticking point is Pension- here is a copy of my 2004 proposal on the issue – I still believe it is a good idea- I ran the same proposal in 2001,2002,2003, and 2004 which can be found on the Boeing site for proxies of those years
RESOLVED: Shareholders request the Board of Directors adopt the following policy:
(1) Employees vested at time of conversion be given a choice between their old pension plans (the “Heritage
Plans”) or the Pension Value cash-balance plan (the “PVP”) at time of their termination or retirement.
(2) The PVP to provide a monthly annuity at least equal to that expected under the Heritage Plans, or an
actuarially equivalent lump sum.
Proponent’s Supporting Statement
Boeing implemented the PVP in 1999 for over 100,000 non-represented employees. Although the difference
between the Heritage Plans and the PVP is primarily one of benefit formula change, Boeing has resisted giving
employees a choice at retirement or termination. We believe Boeing should allow such a choice, as we believe other
companies like Kodak, 3M, Motorola, Delta Airlines, and AT&T have done.
By refusing to give all employees a choice, we believe Boeing is discouraging both new employees who are
unlikely to benefit from the Heritage Plans, and many older employees, who may be disadvantaged by the PVP
when compared to Heritage Plans benefits.
The Board of Directors response last year stated “Overall, the PVP provides a level of benefits that is very close to,
and in some cases better than, the benefits provided by the prior plans.” We believe in some cases, older, longer
service high performance workers also do worse.
In 2003, Congressman Bernie Sanders (VT) introduced H.R. 1677, the Pension Benefits Protection Act, sponsored
by 131 Members of Congress. This act would require companies that convert to cash balance plans to allow workers
who are either at least 40 years old or have at least 10 years of service the choice to remain in the traditional defined
benefit plan that was promised to them when they started working for their company. This legislation was endorsed
by the AARP representing over 35 million Americans, and the AFL-CIO representing over 13 million American
workers. The Boeing PVP, like more than 300 cash balance conversions has not yet received a determination from
the IRS as to tax qualification status, in response to the Company’s application for such determination in 1999. We
are convinced Congress will eventually require companies to allow pension choice to affected employees as a
condition of maintaining tax-qualified status.
Last year, this proposal received 61 million votes, almost 12 percent of votes cast. We believe a majority of
employee-shareholders have supported and will continue to support this proposal. We believe adoption would result
in a public relations, morale building, and long term net monetary advantage for Boeing to voluntary allow pension
plan choice, instead of being forced to do so retroactively by Congress or the courts.
In their February 23, 1998 message to shareholders, Boeing said “A company, any company, is nothing more or less
than the people who make it up.” We still believe Boeing should “walk their talk” in pension issues.
Please encourage the Board of Directors to give a pension choice to those loyal employees who made the company
famous and profitable:
Thank you for your support.
part of Board response is below
Board of Directors’ Response
The Board of Directors opposes this proposal because its approval and implementation would impose a significant
and costly administrative burden on the Company and, more importantly, it would undermine the Company’s ability
to maintain a single pension plan as part of its total compensation and benefits packages for its nonunion salaried
This is the fourth consecutive year that the proponent has submitted this proposal (or a similar variation thereof) for
inclusion in the Company’s proxy statement. On each prior occasion the proposal was defeated by over 87% of the
votes cast. The Board of Directors believes that this rejection of the proposals reflects the shareholders’
understanding of the Company’s commitment to provide its employees with a total compensation and benefits
package that is competitive and that helps the Company attract and retain the best performers. Management believes
that the Pension Value Plan or PVP meets these criteria, and that the PVP’s generous, carefully thought out
transition measures have protected the transition-date workforce.
The Company designed its new pension plan, the PVP, to provide a single plan for the Company’s tens of thousands
of nonunion salaried employees. Before the PVP was implemented in 1999, these employees earned benefits under
more than 20 different plans and formulas (the “Heritage Plans”) that were sponsored by the “premerger”
companies: Boeing, McDonnell Douglas and Rockwell. The PVP was designed to provide benefits that would be
comparable to the benefits provided to current employees under the Heritage Plans and that would allow employees
to earn future benefits under a single benefit formula. The Company did not adopt the PVP to reduce pensionrelated
costs. On the contrary, the PVP increased the Company’s pension liability substantially, as was disclosed in
the 1998 Annual Report.
Under the PVP, employees earn a credit-based benefit or cash balance “account” that grows with benefit credits and
interest credits each year. The PVP uses a progressive scale for benefit credits that increase with age, unlike some
other cash balance plans that use a flat rate. Benefit credits equal a percentage of pay each year, ranging from 3% to
11%, depending on age. Interest credits are based on the 30-year Treasury bond yield, with a low of 5.25% and a
high of 10%. Any benefit transferred from a Heritage Plan continues to grow in proportion to the employee’s salary
and is added to the credit-based benefit. Total benefits are converted into a monthly annuity. The PVP also provides
a minimum benefit of $60/month times years of benefit service.
The Board of Directors understands that the subject of cash balance pension plans is not without controversy.
However, the Board believes that the PVP is not subject to some of the criticisms of other cash-balance plans
because it includes important features that are different from most other cash-balance pension plans. In addition to
the features noted above,
• The PVP preserves all benefits earned under the Heritage Plans, and allows these benefits to continue
growing in proportion to the employee’s salary.
• Employees began earning new benefits under the PVP formula immediately upon the PVP’s
implementation rather than having a “wear-away” transition period before they could accrue any new
benefits under the cash-balance plan.
• The PVP increases the percentage of pay that is credited to the employee’s cash-balance “account” as the
employee’s age increases. Thus, notwithstanding the proponent’s assertion that “older, longer service high
performance workers also do worse,” the PVP actually gives the Company’s oldest employees nearly four
times more benefit credits each year than their youngest counterparts receive.
I think that would be a viable alternative – its a plan already in place- and other companies at the time did give such a choice
The IAM is in a good position. Locating 777X final assembly and wing production anywhere else than Everett was never an option. Too much risk.
Asking for a cut in pensions and healthcare while throwing out money to shareholders and buying back shares looks quite obscene to me.
Is the BoD looking to cut McNerney’s pension, too?
Have to mostly agree with this one. Besides pension, this also caught my eye:
The contract would also provide wage increases of just 1 percent every other year.
Considering their profit levels, the money spent on share buy-backs, plus the increases in productivity present and future (i.e. less man-hours required to achieve the same or even more work than nowadays), this to me speaks of a manifest disdain for those that actually do the work and enable the profits Boeing is enjoying. And who saved Boeing’s ass following the complete and utter 787 programme management screw-up.
I think anyone who faces having their pension reduced (ie the other party reneging on a promise) has every right to be angry. Ditto the wage freeze if those who impose it aren’t similarly affected. But you seem to misunderstand what is and isn’t excessive profit, and the issue of share buy-backs.
For a business like Boeing, that is fundamentally reliant on civil aircraft sales and has the scars that come with the boom/bust that goes with this, there is a self-preservation need to generate high profit margins when the going is good in order to cover when it isn’t. Plus there is the simple fact that they are competing with all of the other publicly listed companies, alternative investments and so on, for the capital required to run the business and invest in the future (777X etc), all of which means generating profits that in absolute terms may look ridiculously large but in % terms aren’t. They are simply how Boeing stays healthy enough to employ anyone.
The cost of all that capital is also on the key reasons (along with simply not having the opportunity to make an acceptable return on it for investors. Boeing is, after all, not a bank) for share issues or buy backs. It is one of the jobs of the management to minimise the cost of capital so that they can compete effectively and borrowing from banks (ie taking on debt) is simply cheaper than borrowing from investors (ie issuing shares).
For a business like Boeing, that is fundamentally reliant on civil aircraft sales and has the scars that come with the boom/bust that goes with this, there is a self-preservation need to generate high profit margins when the going is good in order to cover when it isn’t.
I completely understand that.
What I fail to understand is why workers’ compensation and benefits are cut in the face of record orders, deliveries and profits.
Seems like a case of workers being doomed anyway – during hard times, they get the pay-cuts, are called on to save the company and their own jobs (see the 787 issues), while during good times the argument is that their contract conditions still have to be cut because the company has to put money aside for the hard times.
The twist is pensions like PVP are mostly invested in shares. So in some degree worker exploit themselves for their own pension.
You raise a good point, and it leads me to wonder, who votes those shares? Through what mechanism?
Can’t the workers try to hold their nose until current management/bod is phased out in a few years? Incompetent bunch. However, that arrogant McNerney once in an interview, I think with CNBC, said he was ‘looking at options’ on getting out from under the ‘mandatory’ retirement age of 65. I’m not familiar with US corporate law, but doesn’t it require shareholder approval to change/adjust the corporate constitution or whatever it’s called? He can’t just decide to stay until he’s 70. Let’s hope an actual Airplane guy slips through that toxic BOD’s fingers and becomes CEO. Enough of this mad dog culture, MD went NOWHERE.
Hans said …Enough of this mad dog culture, MD went NOWHERE…
Well not quite- they bought out Boeing with Boeing money, took over control, and are now running the same fubarf scheme as MDC. By the time BA tanks and has to get bailed out by Uncle- they will be retired.
Makes you think how idiotic the American way of ‘hands off’ government really is. Give subsidies to those farmers, but let private enterprise RUIN a century in the making skillset…. Keep your hands OFF, while the Russians, Chinese, Brazilians and yes we EURO’s invest billions upon billions. Que airbus fanboy Keesje saying the USAF subsidizes Boeing… That’s one thing, but we Euro’s subsidize to make MONEY and foster SKILLS, not to buy some decades old tankers and fighter jets.
It’s not such a hands off government at all when one considers how many people’s representatives have their open hands up to do the bidding for anyone that pays them enough.
Boeing management is playing with fire and unfortunately they are not only going to get burned; they may simply simply the mighty Boeing to ashes.
Yes, I know that the top management has everything in place to spend a peaceful & golden retirement for many many years.
And the employee should not complain, they may be able to keep a job at the end, of course without any of the current advantages and none of their current pride or motivation at work…
Sometimes, even as a Boeing fan, I wish the company burns to the groud so as to be rebuilt from the ashes. This current crop of management isn’t just what’s wrong with Boeing, but with corporate America. Be incredibly incompetent, and cry for help/money at Congress. Boeing’s decline is akin to America’s decline. It has to crash in order to rebuild. Who the hell SHRINKS it’s skillset when airplane demand is at an all time high? Build newer better models and you’ll sell thousands. Sure, in the 60’s and 70’s it was different. Airlines ordered a FEW aircraft at a time, and Boeing had no real competitor. Now they order HUNDREDS, and you have Airbus, who by all means sadly, is SMART as opposed to the right wing coporate America cronies at Boeing. Making rich old people richer instead of investing more and more into their workforce and engineers. Sadness.
I would to agree with this point. I am also a Boeing fan, but for the way that is getting doing, I don’t think that this “Mad Dog” McNerney would stay for much time and Boeing’s paradigm gets a deep change. Or, purely collapses like America.
But in fact, if Embraer, Bombardier or Comac (or even Sukhoi or even Airbus (little probable, but, who knows of a Boeing-Airbus merger?)) recovers Boeing from the ashes, would be an good idea, in fact, Because Airbus only won’t be enough to porcessing orders, and also would be raising questions of the “antitrust lawsuits” not only in U.S., but also in China.
The comments here are really interesting. What the Union and many in the US fail to realize is that there are workers all over this country that are willing to do the jobs that Union workers will not do. Those workers are in the South and they are proving to be excellent workers. Boeing knows this and the Union is unwilling to accept that fact. There will be no winners in Washington but there will be BIG winners in the South. Sorry for the bad news but hey this the New Normal. Vote no and plan to be told your future left with the no.
17room… what few seem to realize is that it takes ( depending on job and amount of automation ) at least 3 to 5 years to become sjuitably proficient in aircraft assembly, quality control, test, design, etc. Holds gtrue for engineers and techs.
Pretty well proven by SC on 787 ( BA had to buy out Vought in SC – which in Texas is and has been an excellent supplier for decades . ) And still the SC group is not up to speed.
Now take that same scenario on moving the 777 body and final assembly to SC – or texas and train a new crew in composite for wing, and up to speed on aluminum body join, flight test, etc and the risks get to be significant- espeically with engineering spread all over the world more so than on existing 777.
Boeing is simply trying to panic workers and the state- because of the GE leftovers and MDC leftovers in management plus am new crop of MBA types who can make real neat power point presentations. Add in that the corner office in chicago seems to believe in the Chicago way of ‘ negotiation” while trying to dump the union(s) no matter the cost. I think the cjustomers have made it clear to McNearney and gang that the 787 fiasco was/is close to breaking reputation, trust, reliability records in the wrong direction.
Next move by Boeing should be interesting – get some popocorn, turn down the audio a bit, and wait for the next installment of as the Boeing turns.
What the Union and many in the US fail to realize is that there are workers all over this country that are willing to do the jobs that Union workers will not do.
Incorrect. The unions are perfectly willing to do the job.
The difference is that Boeing is looking for workers that are willing to accept terms and conditions that unions aren’t willing to accept, for better or for worse.
Mind you, those are conditions that even Scott – not a big union fan himself – calls “distasteful”.
(Non-union workers looking at disdain at unionised workers and vice versa of course only helps Boeing management here.)
This whole affair perfectly illustrates the point – made by many in the comments here over the past few months if not years – that without union representation, allocating work very quickly becomes a race to the bottom, a race to find those workers that are willing to do the job under the poorest pension/compensation conditions and with the least power of questioning management’s wisdom.
To clarify: unions are not always right. In fact, they’re quite often wrong. But the same applies to management, which is exactly why there should be both – put very simplistically, to keep each other in check.
There will be no winners in Washington but there will be BIG winners in the South.
What a pyrrhic victory that is going to be when they get to watch Boeing moving elsewhere when another state (or even country) offers even cheaper working conditions.
Sorry for the bad news but hey this the New Normal.
Only if people actually let this be the New Normal.
I can have children make bags. You can’t have low class, uneducated people make widebody AIRCRAFT. See, ‘making’ them isn’t difficult, DESIGNING them is. That’s why the 787’s have a 5% dispatch rate. Keep going South, literally and figuratively,
You are obviously very happy with the race to the bottom for the US workforce and the obscene remunerations the top monkeys pay themselves. Here is a stark reminder of the dismal American reality you are defending.
Financial year 2012:
The top 1% of people in the US owns 43% of America’s financial wealth,
4% own 29 %,
5 % own 21%
and ——————-80% share 7%!——————–
No matter who’s right and who’s wrong (not taking any side here), if the 777X is not built in Everett, the unemployment lines will be long in the area.
I think the main choking point is not pensions. If I remember well, Boeing reached a similar agreement with another union earlier on. The choking point is the 1% annual salary increase.
Scott, it was just 4 years ago that you and I were on KCTS Connects talking about Boeing moving production out of Washington. Neither of us had enough time to fully explain our positions, but mine was that Washington should stop subsidizing Boeing and get on with living without Boeing. Boeing has not created a new job in Washington in 44 years. For at least 2 decades Boeing has subsidized mouthpieces who proclaim that Washington has a bad business environment, evidence to the contrary ignored. The Tax Foundation says again this year that Washington is the 6th most tax friendly state in the country. Jeff Bezos, from Texas, could have started Amazon anywhere in the world, but chose Seattle. In the last decade 2 stockholder owned, exchange traded, companies have moved headquarters from other states to Washington. Even Boeing (check it out at http://www.sec.gov) continues to list its business headquarters as Seattle. Why, because if the headquarters were in Chicago the taxes would be higher in spite of the subsidies given Boeing 12 years ago. If all subsidies to Boeing in the Washington tax code were removed this state would be even more competitive for all business. A few years ago AirBus wanted to set up some operations in Snohomish County, but our leaders, driven by Boeing, chased AB away because this was “Boeing Country”. If Airbus or Comac or any other company wants to make use of the experienced workforce in Washington we should welcome them. I was about to make a sour remark about Boeing management, but, really, anyone who can not already see the problem there won’t see it because of anything I write. You can only kick your dog so often before it turns on you. Boeing management is probably close to learning that lesson. 100 years ago J. C. Penney wrote that getting the lowest price wasn’t always the best deal. Nothing has changed, quality trumps cheap every time. As a practical matter it would cost Boeing untold billions to try to close down all of its Washington facilities and move elsewhere, and it will take years, or decades, to do it.
This is an excellent analysis, well done 😉
“Jeff Bezos, from Texas, could have started Amazon anywhere in the world, but chose Seattle.”
Could it be because is one of the closest port to Japan and China from where most goods are coming from these days?
Amazon operate multiple distribution centres across the US, which are the places where stuff actually arrives and then gets shipped from.
It’s not like everything they send out to customers goes via Seattle first. Most stuff doesn’t.
That aside, don’t overestimate how much it costs to ship stuff once it’s on its way to begin with.
Ireland is actually Northwest of mainland Europe, a pretty small market in itself, and further away (and harder to reach, given it’s an island) from most European markets than, say, some location in France or Germany. Yet, its relatively low corporate taxes offset that geographical disadvantage by far in the books of some companies, which is why Dell, Pfizer, Apple, EMC, etc. have (well, in the case of Dell had, as they’ve moved on to Poland) their major European manufacturing operations in Ireland.
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