Loyalty is a one-way street at Boeing

Boeing’s move to shop around the 777X assembly site, while telegraphed and certainly expected, is another example of the shifting loyalties at Boeing that have been more than a decade in the making.

Before we start, it must be acknowledged that Boeing is a publicly traded stock company and it has fiduciary duties to make sound financial decisions. That being said, one can debate endlessly whether the decisions executives have made have been financially sound (and there is ample evidence with respect to 787 outsourcing and opening a second line in Charleston that the decisions were not sound). Setting aside this debate, since Boeing moved HQ to Chicago in 2001, loyalty appears a thing of the past.

Boeing and Washington State

Washington State, of course, has brought a lot of this on itself by taking Boeing for granted and in many cases ignoring issues advocated by Boeing (better education, improved transportation, better business climate) or making bureaucracy so difficult that Boeing (as well as others) throw up their hands in frustration.

Washington politicians were complacent for decades, resting on the assumptions that Boeing was here to stay and other things mattered more. Even though Boeing CEOs remarked over and over about issues like education and business climate, the politicians essentially shrugged off the complaints.

When, in 2001, Boeing announced it would move its headquarters to Chicago, then-Gov. Gary Locke didn’t even know officials were shopping around. This was a “wake up call,” it was said.

Locke and others hit the snooze alarm and went back to sleep.

Two years later, Boeing began shopping around for an assembly site for the 7E7. Only a last minute scramble by Locke and the Legislature, cobbling together a $3.2bn tax break package over 20 years, saved the day. The 7E7 stayed in Everett. This near miss was characterized as another wake up call, but politicians once more hit the snooze button.

The tax package was written so loosely that six years later Boeing located 787 line 2 in Charleston after a high profile negotiation with IAM 751 that failed. While Boeing told Washington State and Congressional politicians that no incentives could be offered for line 2 that would make a difference–that it was all about the union–South Carolina offered nearly $1bn in tax breaks and other incentives. Washington, having taken Boeing at its word, didn’t offer up any. (Boeing later said in a legal answer to the infamous complaint by the National Labor Relations Board over the Line 2 site location that, in essence, it never even heard of the union–the decision was entirely about incentives.)

Elected officials once again declared this a “wake up” call. This time, they actually did something and began looking beyond Boeing to generate business from other OEMs for the supply chain.

Boeing, Kansas and the Tanker

During the contentious and bitterly fought competition between Boeing and Northrop Grumman/EADS and later EADS solo for the huge KC-X USAF tanker competition, the Kansas Congressional delegation fought hard to support Boeing and to persuade the USAF to award the contract to Boeing.

Boeing promised the tanker would be finished at its Wichita facilities if it won the contract and frequently touted the number of jobs that would be in Kansas.

Boeing did win the contract in 2011. In 2012, the company announced it would close its military facilities there (citing defense spending reductions). Predictably, Kansas politicians cried foul, pointing to the support for the tanker, to no avail.

Boeing, Washington and the Tanker

Just as Kansas’ Congressional delegation fought for Boeing, so did Washington’s. Sens. Patty Murray and Maria Cantwell and Reps. Norm Dicks and Jay Inslee were the heavy lifters, with Murray, Dicks and Inslee being especially visible, vocal and hysterical. Cantwell was more low key, but would tout her role in her reelection campaign the next year. (Her first TV ad had an Airbus A320 in it, quickly pulled and recut with a Boeing 767. We wonder if her campaign and the Washington Aerospace Partnership used the same ad agency.)

This support meant nothing at the end of 2009 when Boeing elected to locate 787 Line 2 in Charleston; the dispute with the IAM 751 trumped all.

Boeing and the Unions

It’s not as if Boeing’s complaints about its unions, notably SPEEA (engineers) generally and the IAM (touch labor) in particular, aren’t without merit. (Boeing’s relationship with the UAW at Long Beach’s C-17 plant has generally been much better than with the IAM in Puget Sound.) IAM 751 struck Boeing several times, including back-to-back strikes in 2005 and in 2008, the latter for 57 days. Boeing can’t endure work disruptions as it has in the past when Airbus now has equal or better market share and new competitors are or will be nipping at its heels. Customers become unhappy and there are alternatives today.

Additionally, decades of embedded contracts drive up costs, and being encumbered with a defined pension plan based on unrealistic return assumptions hurt the balance sheet and eat up cash unnecessarily. Today’s economy is based on defined contribution plans or other retirement vehicles. Unions need to recognize this and be willing, however reluctantly to change.

At the same time, when the unions see record profits, billions of dollars going into stock buybacks that benefit the McDonnell family and Harry Stonecipher among other shareholders–which for a long time starved research and development of funding in favor of derivative models rather than new designs–union members are less willing to give back benefits previously hard won. Executive pensions have reached the obscene level ($265,000 a month for Jim McNerney) while McNerney advocates taking traditional pensions away from Boeing employees and changing Social Security for the nation’s citizens.

Still, it was the members of IAM 751 and SPEEA that toiled to work through the 787 and 747-8 program debacles. It was the 751 members who cranked up production on the 737 and 777 lines to keep the cash flow coming to support the billions of dollars in cost overruns of the 787 and 747 programs.

Members of both unions feel disrespected and unappreciated by Boeing. This adds to the hostility felt by the unions toward Boeing, where it’s clear Chicago is engaged in a war on the unions who saved Boeing’s bacon in the bad times.

Confrontation and Ultimatums

Boeing has created the impression with Washington State, IAM 751 and SPEEA that it prefers confrontation and ultimatums to cooperation and accommodation. Boeing is not shy about telling these parties that “if you don’t do this, we will leave.” There is a fine line between being straight-forward and candid vs giving the appearance of ultimatums. Boeing seems to cross that line on a regular basis.

Boeing vs Airbus

Airbus diversified its production from its historical bases in Toulouse and Hamburg with a new A320 line in Tianjin, operations for several years, and Mobile (AL), now under construction. There is a significant difference in the positioning Airbus used vs Boeing’s approach. Airbus positioned these two new lines as strategic positives. Boeing used South Carolina and is now using 777X as tactical confrontations with its union, and to a lesser extent, with Washington State.

Loyalty is a One-Way Street

As noted at the start of this column, Boeing has a fiduciary duty to make sound financial decisions. But the track record since 2009 in particular seems to dismiss the loyalty exhibited by its political supporters and its own employees for pure dollars-and-cents expediency. Boeing seems driven more by “what have you done for me lately” than by loyalty.

Loyalty, indeed, seems in short supply in the business world in general.

37 Comments on “Loyalty is a one-way street at Boeing

  1. Loyalty?

    Like when the employer is chronically underfunding pension plans while shoving out dividends to shareholders and buying back shares instead – and then asks employess to agree on cutting pension plans while the CEO will walk away with a monthly pension of a quarter million PER MONTH?

    • Here is what the Swiss did this Sunday to curb their CEO’s obscene salaries and golden handshakes. Once the law is framed the shareholders decide how much the CEO’s are worth. The EU is also looking at ways and means to curb these mind boggling excesses.

      “By Neil MacLucas
      Updated March 3, 2013 6:52 p.m. ET

      ZURICH—Swiss voters on Sunday overwhelmingly backed a plan giving shareholders sweeping authority over executive pay, the latest in a series of moves aimed at curbing what is seen as excessive remuneration levels at top companies.

      Roughly 68% of those who voted supported the Minder Initiative, named after the businessman and politician who created it, according to the government. The 24-item measure enables shareholders of Swiss companies to approve or block proposed compensation for corporate executives and board members.”


  2. From a shop floor perspective, the strikes in 2005 and in 2008 were more about Boeing kicking the IAM when it was down in 2002, using 9/11 to take it to the cleaners, and laying off 20,000 people. In 05′, Boeing once again tried to use economic pressure against the hardened veteran IAM members that were left. There was enough bad blood left over for 2008, A strike which began before the economic collapse.

    The whole series of events came about because Chicago, chose to take advantage of situations, and people stuck in them, in quite a callous manner. One recalls that in 2002, The Boeing negotiating team sat by the pool at the Airport Doubletree, and refused to even come to the table. That was a pronounced show mendacious intent.

    Further, the 2011 contract extension, which at the time was heralded as a new dawn for relations between Boeing and the IAM can only be viewed now with high degree of cynicism. That contract extension contained enhancements to the defined benefit pension plan now in place. Since that extension has nearly three years of it’s four year term left to run, it would appear very much that Boeing intended to renege all along. The same applies to a provision in which Boeing would have paid any expense incurred regarding the Obamacare excise tax, found in the extension, and dissapeared in the rejected offer, replaced by a provision that allowed Boeing to reduce benefits at will to avoid the excise tax. Further, the 2011 extension LOU 42 which gave 737 MAX to Washington and the IAM, was due to expire in 2016, and without the ability to negotiate it’s extension, freed Boeing to open a line somewhere else, or possibly, selling off portions of it Renton operation, say wing assembly, to another party. This is quite viable since it desires only to accomplish final assembly in house, and ha been pushing this as it’s production model. Of course, such a move would take the work out o f the IAM 751 bargaining unit, leaving employees to re-apply for their own job, and of course lower compensation, Think Spirit Aerosystems.

    The 2011 extension, and the shocking reversal of it in near total, absolutely doomed Boeing’s offer. It was as if the IAM had been given a gift and an acknowledgment of value, and had the giver returned demanding it back, or else. The estimation in the eyes of the IAM rank and file of thecorporate character which Boeing had prior to the 2011 deal, was re-affirmed, with a overall sense of shame only the truly gullible feel after that have been done in by a confidence trickster. They simply refuse to be done in again.

    The IAM didn’t commit suicide with their vote. They avoided it. But they are still standing on a narrow ledge. With Jay Inslee, and perhaps the gang that couldn’t shoot straight from the IAM international in charge of entreaties to Boeing, they may well just just step off the ledge and end it all.

    Boeing for it’s part, has it’s own issues, well laid out is Scott’s piece. But Chicago does remind me of Ahab:

    “To the last, I grapple with thee; From Hell’s heart, I stab at thee; For hate’s sake, I spit my last breath at thee”.

    And we know the ending of Moby Dick do we not?

  3. Boeings management confuses me, its business is all about the long term. But there does not seem to be a clear and transparent long term strategy, one which is supported by one of the most important assets, the labor force. Instead it seems we are seeing ad hoc maneuvers from management, mostly driven by short term vision. Although pension restructuring is all about the long term, defined benefit plans are a blast from the past and hurt the competitive position.
    The other most valuable asset is knowledge, who thought of outsourcing this? Talking about short term vision and detachment of reality. The money is made by having a technological advantage over products from competitors. Ánd by keeping the level of technological advancement at such a level that competitors can’t even try to enter your market.
    I truly hope that the marketing department is not as much in charge of the specification setting as during the 787, it doesn’t need to be explained why it is a bad idea to sideline inputs from your engineers.
    Over the past outsourcing offcourse has gone to far, but also here: what was management thinking by putting risk sharing above keeping control over your supply chain (and development)? All they did was putting more risk into the company. And btw risk sharing? Why share the risk which allowed you to make a profit in the past?

    For Boeings sake I hope management starts realizing what exactly the thing is where they make money on, who helps them make this money, and how to keep doing that in the far future, and communicate honestly what has to be done to make that happen. (And for the workforce to have the trust again in management and work alongside management to get those changes happening)

    • IMHO the outsourcing was done as an act of “Cargo Cult”ism.
      i..e the visible aspects of a desirable method were replicated followed by “now waiting for the Cargo”.
      My expectation is that the next “cargo cult” is about using robotics.

  4. Airbus diversifying manufacturing was a positive but Boeing was not. That lacks a little bit of reasoning. To an extent both have the same long term objectives.

    Steve above does have a pretty good analysis from the IAM perspective.

    RE: Wichita this 2012 news is perhaps not entirely made up by Boeing, and portentous for the future in Washington;

    “Costs are higher at the Wichita site, which has 97 buildings and covers nearly 2 million square feet, he said. Bass said it’s 70 percent more expensive to do work in Wichita than in San Antonio, when considering wages, infrastructure costs and the cost of doing business here. At the same time, competition is fierce for maintenance work against competitors with smaller facilities and less overhead, Bass said.”

    It’s worth noting, of course, that in 2005 and 2009 labor contract negotiations and strikes were threatened/difficult. The unions in Kansas largely got what they wanted for 10 or so years, as I recall, as Boeing diversified and sold off Spirit/outsourced other supplier businesses. And then…

    • Airbus diversifying manufacturing was a positive but Boeing was not. That lacks a little bit of reasoning.

      As Scott already wrote: There is a significant difference in the positioning Airbus used vs Boeing’s approach. Airbus positioned these two new lines as strategic positives. Boeing used South Carolina and is now using 777X as tactical confrontations […]
      Then, there’s also the difference, often pointed out, and often ignored, between establishing additional FALs for the A320 while still increasing output and workforce at the traditional lines in Toulouse and Hamburg – and proposing to stop 777 production in Everett and locate the 777X elsewhere. And I mean this purely from an employee-employer-relationship perspective, without even going into how much risk this introduces with regard to processes.

      It’s maybe also worth pointing out that even opening the Hamburg FAL was initially quite controversial within Airbus because workers/unions in Toulouse feared it would lead to job losses there. Which is of course not what happened; instead, Airbus so far has been able to not only position every new FAL as a strategic positive for the company, but also demonstrate that the new FALs were not established to enable job cuts at the existing locations.

  5. Note that Airbus diversified its production sites. This is not automatically the same as outsourcing. E.g. Airbus keeps the wing in-house (but not in Toulouse or Hamburg), but Boeing outsourced to MHI. This is totally different in the long term perspective. Airbus still has the technology in-house, but Boeing does not. Boeing cannot on its own produce a state-of-the-art CFRP wing… Sure, Airbus outsources some subassys, but less than Boeing on the 787.

    And as one noted above, build additional FALs as a positive addition, not as negative subtraction.

    In addition: 1) Airbus was always diversified as a company, consisting of several smaller companies in the beginning. They had to learn early on how to plan for decentralized production, and it took them years. 2) No prod sites (except secondary FALs) were green-field sites.

  6. A had to split work between Germ-Fra-Eng. Naturally, there also wasn’t a need/desire to incorporate Japanese suppliers into their team. I don’t see the wing outsourcing as surprising given the different industrial needs. Boeing certainly knows how MHI is building the wing they designed, and they could in the future work to do so in house, just as they could have built it themselves originally. It’s just not really a big issue; MHI is a very good supplier/partner.

    Again, China and Alabama are greenfield FAL’s, as is Charleston and wherever 777X goes. The 787 surge line wasn’t a negative subtraction to Charleston, certainly. The parallels to Kansas are probably apt.

    They also had a disloyal/disharmonious relationship as between labor and management. (But I’d say that was a 2-way street also).

    A has tried to be delicate, but their desire for labor flexibility is quite real and both sides know it;

    “We will be vigilant to make sure they are not robbing Europe to pay the United States,” Gilbert Plo, a delegate of the French union C.F.T.C. to the company’s central works council, told Reuters on Sunday.

    During a news conference Monday in Mobile, Mr. Brégier said using workers in Alabama could eventually cost less, and give the company more labor flexibility, than operating factories in Europe. “But it is not the main reason,” he said. “We are used to operating in several countries, and we will be integrating Mobile into that. We do not intend to put these sites in competition with one another.”

    “We want guarantees they won’t be touching the production rates in Europe – at Hamburg and Toulouse,” said Francoise Vallin, a senior official at the CFE-CGC union which represents supervisors and some managers in the Toulouse-based group.

    “We also want guarantees that there will be more employment in Europe for the intermediary sections,” she added.

    • Boeing certainly knows how MHI is building the wing they designed, and they could in the future work to do so in house

      Not without doing their own development work, or licensing MHI’s intellectual property. Which was exactly mneja’s point.

      MHI is a very good supplier/partner.

      Funnily enough, given the subject of Scott’s column, this statement counts on MHI’s long-term loyalty. Let me just say this: I work for an IT company that had a long-standing and deep relationship with another IT company. You’d be surprised how quickly those ties were suddenly severed.

      • You beat me to it…!

        Agree with your point about loyalty. Had the same experience, but in the aero engine field… things went sour at an astonishing pace (guess what: the OEM did not want to pay what the supplier (we) wanted, they pulled work back in and learn how to do it themselves, cost them a fortune and enormous pains, some years later the work eventually went back to us… and not at the OEM’s price).

    • texl:”Boeing certainly knows how MHI is building the wing they designed, and they could in the future work to do so in house, just as they could have built it themselves originally.”

      But B did not build the wing, and they have thus lost tons of knowledge about that. They know in principle how MHI builds the wing, but they do not know all the details, which is what counts for high productivity and high quality.

      B can probably acquire that knowledge, but at a cost and with lead time. For the 777X there is not time to do so…

      Also, MHI know has passed one of the highest entrance barriers in a/c production… this is the important aspect. What happens when MHI wants more money for the wing than B is willing to pay? B cannot then easily turn back and do it in-house… they are in MHI’s grip. Are there any other suppliers that can make the wing at short notice?

      In addition, the profit for the wing is now cemented at MHI, B must accept lower profit on their own part since they do less actual work. Has the BoD understood this or do they believe the integrator/OEM can always keep the same margin regardless of content% outsourced and till remain competitive?

      Airbus sure has their own lines to dance on, but they are much less demanding to cross than Boeing’s (and A’s management seem to acknowledge there exists another party and were the sensitive issues are, per your quotes above). And A keeps e.g. the wing in-house, as I mentioned earlier. Make a large difference IMO.

    • Interesting analysis.

      I just want to note that as a vocal critic of the MHI wing outsourcing, I’ve never suggested, and I don’t think many have, that MHI is not a highly competent and reliable supplier. Everything I have seen suggests that they are. They are, however, also a prominent one of the competitors that Boeing says are nipping at its heels. Further I do not share your confidence that you can effectively retain institutional capability in a process by merely overseeing it at a high level.

      Although, admittedly I do not work in manufacturing, it seems to me that, while explicit technical understanding of a process is necessary for success in technically challenging work, it is not sufficient for efficient work. Rather, the deep, instinctive comfort and familiarity that comes from working with the process at a detailed level is the necessary pre-condition for both true efficiency, and the inspirations and insights that improve processes and spur innovation and technical advances. As such, although I could just plain be wrong, I have to think that outsourcing design and production of the most technically challenging components of your product must necessarily result in a loss of the knowledge resources needed to competitively perform that work in-house in the future.

      • RE MHI and Wings. Yes, historically MHI has been an excellent supplier of major sub assemblies since at least 767 days. What most-many outsiders may not be aware of is that until the late-7 and the share the $$$ games, design-development- production of wings were the ‘ family jewels ‘ of Boeing with a lot of the nitty gritty nol so obvious details kept VERY close to the heart. At the same time- the wing to wing box join issues such as the ‘ plus chord” sections ( named after the edge on view looking like a plus symbol + or double + one on top of the other.- have always been difficult to design and or produce and to take out the various stresses involved in an safe and efficient manner. It was in this area that the first few 787’s had significant problems uncovered ‘ at the last minute or later ‘ and discovered by a Boeing engineer and certain test data verification.

        It is this area or expertise- learned over decades of design that is hard to replace , although computer analysis techniques have significantly improved as has testing and documentation.

        The Chicago office is now in the mode of totally trashing that kind of expertise, both in design and fabrication. The 7 late 7 is proof .

      • As I recall, Embraer removed components from Japan due to quality control issues.

        Frankly we do not know how much of the 787 delays was due to the same issue initially on the wings (obviously solved). How much did that cost and the time and learning curve involved just in managing it?

        Also keep in mind that the battery is made in Japan and when it was all said and done, there were huge questions in regards to the quality of that battery.

        While the big publicity was on the container, the test required at the battery mfg were increased massively. Essentially they were putting out crap batteries though and did not have a real testing regimen in place to ensure they were not. No one else passes more than 60% of that type battery and they were passing over 90%.

        My take was that while the battery should have been contained originally and there were contributing factors with the detection and charging system, the battery itself had major flaws.

        The point is that Japan can produce good stuff, but getting there is a chronic issue.

        Boeing cannot build a composite wing, they never have done one and now they need to learn how to do it. That’s going to cost and its another indicator that vendetta, whims and lack of accountability in Boeing Chicago goes unanswered while the company problems are all blamed on one entity.

        If they gut the union then they will blame someone or something else when the big start should hang right over the no longer accountable board in Chicago.

  7. You forgot to mention the now famous video of Gov Gregoire “walking the line” with picketers in the last Boeing strike…….


    • We don’t remember her actually walking the line. We were present at a pre-strike IAM rally when she was there, however.

  8. Have fun with your pensions and pink slips Everett folks, it sure beats pensions and a job, right?

  9. RE Pension issues- In addition to ‘you play ball with us- we’ll shove the bat up …” there are a few more insidious games.

    It goes like this.

    Executive Pensions include the basic BCERP plan PLUS an additional plan.

    The BCERP plan is usually fully funded according to ERISA ruies which are NOT the kind you can use at home ( unless you want to enjoy club fed ). Executive pensions are NOT subject to the same rules, but are supposedly a direct obligation on the company if and when..

    IF the ERISA ( Plans PV and BCERP being the two largest grunt plans ) plans are considered fully funded and with excess funds per unique accounting rules, then the ” surplus” can be legally pencil whipped into OPERATING EARNINGS. And this has been done in several years in the past – 10 to 20 percent of Operating earnings numbers have been due to Pension earnings/surplus. ( scrub the Annual report data to find out which years ). Now low interest rates and low stock market $$ cause the plan to require extra dollars put in. However, look at the market in the last year or so. This in turn generates under ERISA and accounting rules extra $$ in the Plans. No money actually changes hands and ‘ surplus” dollars can be carried over in some cases for a ‘rainy day ” – thus we have the term ‘ vapor profits ”

    Betterr operating earnings make for better bonus issues for executives and certain executive- special pensions.
    Now consider that nowdays, with a lot of automation, labor costs are probably less than 10 percent- just how much touch labor percentages are in percentage is not known outside the corner office. Which of course leads to why so insistent on moving to ‘ lower labor cost states” if bucu $$ must be spent to build facilities, train troops, etc.

    Apparentlym the answer is ‘ cuz we can’ or UNsolidarity forever re unions, Solidarity forever re Exec Bone-us “

    • Don, focusing on how much money the company makes is just not a winning strategy for labor negotiations. Until the company is bankrupt, and then employee owned. Again note that the company highlighted labor costs in San Antonio being 70% lower than KS when closing ops in KS.

      If I’m paying someone to build something for me, which I turn around and sell for a profit (say, like Boeing does to airlines), I expect them to make it efficiently/reliably. The near certainty of a strike in Washington in 4 years, with uncompetitive costs makes that a dubious place to put more work (which, while a derivative, is what the 777x is).

      Yes, executives are paid a lot. And yes some of it is tied to stocks/profits. Good find. THERES NOTHING IAM CAN DO ABOUT THAT. McNerny will retire a wealthy man, and many people would do themselves a favor to just accept that.

      • Uhh- texl1649 – you seem to have missed my point. So I’ll try again

        1) The ” main” issue in the NON negotiations take it or leave it ” has been the pensions and takeaways. — to control costs ( and profits, etc)

        2) I pointed out that due to wierd accounting rules, excess pension assets can be put into earnings ( on paper ), thus boosting bonus and stock price with tax exempt money. A rise in the stock market raises the ‘ excess” or ” surplus” due to the accounting rules- valuation on Dec 31 of every year.

        3) Labor ‘costs’ are NOT a big slice of expenses. Those ‘costs” include overhead and of course management ‘ labor” plus many many employees ( clerks, secretaries, etc NOT part of the union. ) Somewhat less than half of the Boeing employees are in either IAM or SPEEA
        4) Thus the company PR about union ‘costs’ is overblown as to the real effects

        Nor do I espouse the comments of the flaky seattle Council admitted socialist taking over the factory to produce buses and ? She is just a symptom of the left coast. See seattle times letters for example.

        5) Those figures re 70 percent lower labor in Austin are about as believable as the first flight date of the 787 PR at rollout. Why not ask BA to support that number with the real data they have for comparable jobs ? I’m sure they would be wiling to provide it -after hell freezes over.

  10. This is a very accurate analysis from my perspective (an insider to many of the events described).

    Scott identifies one of the little talked about but critical aspects of the problem. The unions’ recent experience with Boeing informs them that Boeing will do what it wants to do, regardless of any promises or contracts.

    If you’re trying to strike a deal with somebody who has lied to your face previously, you start from a deficit of trust. That wariness infects all aspects of the relationship.

    In 2011, SPEEA (the engineering union) made a series of confidence building overtures towards Boeing designed to set the stage for successful 2012 negotiations. SPEEA even floated the idea of taking strike off the table and submitting any disputes to binding arbitration (Boeing rejected this idea).


    These gestures led to early discussions about resolving negotiations quietly and quickly. This process never produced an early agreement because Boeing was unwilling to put its promises to the union in a legally enforceable contract and the union leadership wasn’t willing to trust the company without the ability to enforce its agreement.

    Boeing leadership then shifted their focus towards reaching an early agreement with the IAM. The IAM leadership took a leap of faith at the request of Ray Conner that things would be different going forward. They accepted concessions as part of an early contract that supposedly guaranteed that the 737 MAX would be built in Renton. That LOU was so full of loopholes that knowledgeable observers scoffed at it. However, the IAM leadership weren’t stupid. They knew the LOU was essentially legally unenforceable….but they had been given personal promises by Ray Conner and other executives that the commitments would be honored (and certain unwritten commitments would also be honored). They truly took Boeing at its word and bet their members’ future on the credibility of Conner.

    As noted above, SPEEA (the engineering union) was unwilling to take unwritten promises and their negotiations devolved into a long bitter power struggle where Boeing at first tried to force a deal similar to what the IAM just rejected. These negotiations ground to an ungracious halt with SPEEA achieving all its goals but one and Boeing eliminating the pension for new hires. This was a tradeoff that made everyone unhappy and has set the stage for ugly negotiations in 2016.

    So here we are today. Boeing leadership broke the promises they made to the IAM in 2011 and tried to force through an agreement that not only imposed grotesque across-the-board concessions but actually eliminated the one thing the IAM arguably achieved in 2011 (the 737 MAX LOU).

    Who can be the center of gravity to pull the parties together? More to the point, who can pull the parties together and give each a face-saving way to move forward? The IAM cannot agree to anything close to what was just voted down. Boeing management can’t back down from their threats to move the work without some good excuse.

    As if giving both the IAM and Boeing leadership a path forward weren’t difficult enough, the state has to ante up with the transportation package and maybe something else. Nobody is talking about SPEEA but you can bet Boeing wants concessions from them as well.

    Somebody needs to broker a grand bargain here but there’s no obvious answer as to who. Governor Inslee played an extremely unhelpful role behind the scenes in the IAM debacle so he no longer has credibility as such a broker. Perhaps the two senators could united to act as brokers? Heck, maybe Ambassador Locke could put his diplomatic skills to work here?

    • hey NOPE? – …SPEEA even floated the idea of taking strike off the table and submitting any disputes to binding arbitration (Boeing rejected this idea). ..

      That concept was NOT put forward by the SPEEA leadership. It was a surprise to the elected officials and Council when revealed. it was the brain**** of the executive director-PERIOD. Combined with many other miss-steps and miss-information by SPEEA, led to the disaster which resulted in SPEEA losing the pension game for new employees.

      Yes there were missteps on both sides- and NO i am not privy to the details of negotiations- but the public releases by SPEEA and certain videos ( since taken down) by staff which were wrong and misleading appear to have been just the tip of the mess called negotiations.

      • Don,

        Your assertions are simply false. The executive board had been briefed and the council was given a presentation on the proposal to adopt binding arbitration.

        As you note, you are not privy to anything that happened within SPEEA. I do you recall that you claimed to find errors in the negotiation videos that SPEEA put up but as is your pattern, you were the only one who saw the errors. Not even Boeing questioned the accuracy of the videos SPEEA put up.

      • Uhh NOPE- no need to get into a P*** contest. I stand by my comments under my name, then and now.
        I will note both the bit about ‘scrap the cap ” on SS covered compensation, and the initial proposal to replace the Covered Compensation number with some sort of Boeing equivalent , the claimed effects of an Infinite SS Cap, and the total disregard of the ‘ minimum calculation’ as part of the SPD documents and the legal plan documents proved a lack of understanding of BCERP and ERISA, and IRS regs re Covered compensation numbers.

        That being the case- why would Boeing speak out to prevent SPEEA from digging a deeper hole. And the arbitration issue raised seems to have been due to the difference between understanding public union ” negotiations” versus private union issues and negotiations. Sort of like the new seattle council person

        Have a good day !

      • Hmmmm NOPE posted …Your assertions are simply false. The executive board had been briefed and the council was given a presentation on the proposal to adopt binding arbitration…

        Thats sort of at ODDS with the Council and E-Board records and several councilcritters recollections

        NO mention in Agenda, E-board minutes just prior to meeting on June 11, 2011 of that subject on the agenda or discussed in E_Board minutes prior to meeting.

        No mention of an Executive session at all

        And did the council ever approve it in place of Negotiations ?





        Would appreciate a polite response

        Thank you


  11. Uhh smoker ?? …”Boeing cannot build a composite wing, they never have done one ”

    Toatally wrong. Boeig built and assembled the major section of the B2 wings generally referred to as the ‘ Tomahawk ” due to the shape of the main portion without the ‘ feathers” leading edge, trailing stuff. That included composite spars, ribs, etc and also lightning protection. Thats not a myth- I was there and designed some of the brazed diamond abrasive cutters used for trimming the periphy, etc.
    And that was in the late 80’s and early 90’s.

    Also BA built and assembled the major part of the body of the B2. Which is why they have a major sized autoclave in the dev center and a very large bed 90 foot ‘ router ” In addition they built and assembled the major portions of the A-6(E? ) wings in a Navy refit of the E-6(X) version at the Dev center.

  12. One point that should be noted is that the Airbus ‘subsidiary lines’ of commercial products (military as in Spain differ) were selected for what can best be called “penetration of foreign and difficult markets” reasons. That is notably the case for the US venture as, more than anywhere else, production decisions are subject to parochial lobbying and local/regional political influence. But those above are correct in that Airbus keeps its proprietary building close to hand – there was some question of the British wing centre being closed down if it was sold and not then operating fully under Airbus management control.

    And as for the sad, sordid and endless tragedy of Boeing and its employees – it is, no doubt to some readers surprise, a deplorably common situation today in both the United States and Canada (and to some extent in the UK). A product of short-term investment practises by the company (management capitalism) and long-term fears by the union, especially those where, as is now common, company investments in joint retirement/health plans have not matched that expected at the time of signing. One of the primary reasons for the greater labour efficiency in high-end industry in Europe is that the courts enforce company obligations in this area, with the unforeseen result that shortages force company and union to agree to joint, and jointly enforceable settlements. Of course there judges are appointed, not elected, and serve for life and in Germany at least are aware that union members serve on company boards!

  13. Somewhat difficult to chase down precise cited statistics for a blog post, but in general on every quality-of-life statistic including educational attainment, lifespan, teenage pregnancy, and many more, Washington State ranks in the top (best) quintile while South Carolina ranks in the bottom quintile. So naturally the best response to that is to destroy what made a high quality of life possible in the northwest because Freedom. Also too union thugs.

    Or as Illinois Governor Quinn put it to the CEO if Caterpillar when the latter complained about high taxes (high meaning historically very low, but higher than 2006): ‘Ok, let’s start with the University of Illinois. Which do you want me to terminate first: the Mechanical or Electrical Engineering department?’

    Cue spluttering about wastefraudandabuse…

  14. http://www.speea.org/Communications/News_Release/Club_LH.pdf

    Open letter regarding the 777X site selection;
    Representing more than 60,000 skilled and experienced employees at Th e Boeing Company, the Coalition of
    Labor Unions at Boeing (CLUB) assures airplane customers, investors and the fl ying public we are
    ready to meet the challenge of designing and manufacturing the 777X on time, within budget and without
    growing pains.
    Every successful Boeing commercial aircraft was designed, engineered, manufactured, protected and
    delivered by our members. From the Teamsters who transport the parts, SPEEA members who design,
    engineer and deliver aircraft, Machinists who skillfully manufacture the planes, Operating Engineers who maintain
    our facilities, Industrial Fire Fighters who protect our plants and Security Guards who protect the people
    and our trade secrets, union-represented Boeing employees in Washington state and other legacy locations are
    the proven path to success.
    Our members are ready to answer the demand of airplane customers at the recent Dubai air show to rein
    in control of processes and renew focus on building the highest quality, safest and most reliable aircraft in the
    world. Boeing has the infrastructure today. Our members have the training and experience. Together, we can
    put the anxiety of aerospace customers to rest for good.
    Th e Boeing reputation, along with the success of our company, our communities, and our aerospace
    customers depend on making the right choice for the 777X. Th e Coalition of Labor Unions at Boeing is
    the clear choice – the right choice, to meet this challenge!
    IAFF, Local I-66
    IAM, District 751
    IUOE, Local 286
    SPEEA-IFPTE, Local 2001
    SPFPA, Local 5
    Teamsters, Local 174
    Approved: Bo Hanna, IAFF I-66; Larry Brown, IAM District 751; Rick Spencer, IUOE Local 286; Tom
    McCarty, SPEEA – IFPTE Local 2001; Daniel Clayton, SPFPA Local 5; Dave Jacobsen,
    Teamsters Local 174.
    Media Contact: Bill Dugovich, SPEEA Communications Director (206) 674-7368, or (206) 683-9857

  15. RE YOUR COMMENT ..Loyalty is a One-Way Street

    As noted at the start of this column, Boeing has a fiduciary duty to make sound financial decisions. But the track record since 2009 in particular seems to dismiss the loyalty exhibited by its political supporters and its own employees for pure dollars-and-cents expediency. ”

    Interesting what BA had to provide for NLRB hearing a few years ago re Charleston


    Summary- screw the union – no matter how much it costs. BA KNEW it would upset rate and experience and . . . .


    ” …Boeing has no such gauzy feelings. When it was mulling putting a commercial jet-making plant elsewhere for the first time, into South Carolina, internal documents showed doing so would cost the company years in delays and billions in money. But — and this “but” apparently was priceless — leaving would give the company “leverage” over its Puget Sound workforce and political leadership…”

    Now what was that about fiduciary responsibility – hows that 7 late 7 rate and quality working out for Boeing ??

  16. Pingback: Does 777X assembly site matter to airlines? Yes, up to a point; and a retrospective to 2009 | Leeham News and Comment

  17. Pingback: Could Boeing face new NLRB complaint over 777X site search? | Leeham News and Comment

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