The deeper, longer term implications of IAM’s Boeing contract vote January 3

There are deeper, longer term implications for the January 3 vote by IAM 751 members on the revised contract proposal from Boeing than have been discussed in the public domain.

  • Contract extension to 2024 brings “labor peace,” but also significantly weakens the union in the future.
  • The replacement for the Boeing 757 lurks in the background.
  • So does the replacement for the 737 MAX.

The near-term implications have been discussed ad nausea: for employees, vote for a contract that includes concessions, notably on pensions, or risk losing the assembly site for the 777X. For the states, Washington could be a winner, or a big loser. The state that’s awarded the assembly site would be a big winner. Suppliers will supply Boeing regardless of where the 777X is assembled.

Another near-term implication we’ve talked about: the fall-out on the IAM, both at the International level and the District 751 level. No matter how the vote turns out, there is a civil war within 751 members who are royally upset with their leadership and others who believe in it. The civil war between 751 and IAM International HQ will continue well beyond the vote, with the prospect that International could simply depose all the 751 leaders and place 751 under a trustee “for the good of the union.”

But there are much longer term implications of the vote.

Extending the contract to 2024

If 751 members approve the contract proposed by Boeing, the term will be extended to September 2024 from September 2016. This means Boeing will have “labor peace:” there can be no legal strike during a contract. This means Boeing can assure customers there won’t be any delivery disruptions because of a strike, an important piece of mind during the production ramp-up periods for the 737 family, the 787 and the introduction of the 777X.

With the 777X Entry-into-service slated for 2020, production of components begins as early as July 2016. Having labor peace during these early days is important to keeping the 777X EIS on time.

Roll-out and flight tests are slated for 2018. With a 2020 EIS, Boeing did not want a four year contract extension from 2016 that could put at risk contract negotiations and the possibility of a strike just as the plane was to be delivered. The logic of Boeing’s strategy is understandable and compelling—and one with which we totally agree.

757 Replacement

We last wrote about the need for a 757 replacement October 16. Boeing knows there is a need for a 757 replacement. Neither the Airbus A321neo nor the 737-9 MAX are true replacements. Neither has the range, and the 737-9 MAX—which is a double-stretch of the original baseline 737—and which is between 7,000-9,000 lbs heavier than the 737-900ER with only a 1,000 lb thrust bump, according to one airline customer we’ve talked with, simply doesn’t match the performance of the 757 or the A321neo.

Neither do the proposed airplanes offered by the two competitors to Airbus and Boeing, COMAC and Irkut. The COMAC C919 is purely a paper airplane at this stage with a range that doesn’t even match the A321ceo. The Irkut MC-21 (to be renamed YAK-242) won’t have the performance standards, either, and Western airlines won’t order this airplane. Suggestions that the MC-21 is a potential 757 replacement simply don’t stand up to scrutiny.

We have written on several occasions that Boeing plans to develop a 757 replacement with an EIS of around 2025. We know from our Market Intelligence that Boeing is already working in this project. In fact, Boeing has been conducting a “New Airplane Study” (NAS) about a 757 replacement since at least March 2012.

If 2025 is the EIS, a seven year development period means a launch of around 2018—just about the time the 777X has its first flight. If a longer development period is required for a clean-sheet airplane, back this up to as early as 2016 for Boeing to be surveying customers.

How does this fit into an IAM contract extension? Here’s how.

The Renton (WA) factory is full assembling the 737. The wide-body factory at Everett should have space by 2025 but may not then if sales of the 747-8 recover, which we consider unlikely but we can’t rule this out. Boeing claims the 747-8 will be in production to 2030. So it’s possible there may not be room for the 757 replacement to be assembled in Everett.

In any case, Boeing will stage a competition where the 757 replacement will be assembled—and when this happens, it will return to the IAM for yet another contract extension and no doubt include concessions. This would occur while the 2024 contract was in effect. With an inability to hold a strike threat as leverage, the 751 membership would hold the weaker bargaining hand, just as it does today.

Boeing’s strategy is brilliant. Whether Boeing will prevail remains to be seen.

737 Replacement

We’ve previously written that a clean-sheet, new design replacement will flow from the 757 replacement. We have an EIS for this around 2027. A seven year development period backs this up to 2020. Site selection competition once more starts during an IAM contract that’s in place. Once more the 751 won’t have a strike threat to use as leverage.

The 737 MAX is assembled in Renton (WA) and Boeing is gearing up this factory to produce 52 airplanes a month (a rate of 47 has been announced) and studies have been conducted for years with the potential of going to 60 a month. Although there is also a study about establishing a 737 MAX line in Charleston (SC) at the 787 factory there, we consider this prospect unlikely; Charleston will be gearing up to produce seven 787s a month by 2018 and expanding to include 737 MAX supplier work. It will have its hands full.

The facilities lease with the City of Renton expires in 2030, with options for two 10 year extensions.

The Bottom Line

For Boeing, its strategy of extending the contract and using site selection competition as a cudgel for more extensions and more concessions is masterful. For 751 members, they have to weigh give-backs against job security. The states are subjected to economical blackmail.

And in the current situation, the civil war within IAM can only work to Boeing’s advantage, for it disrupts unity within the union and weakens it.

These are all factors that 751 members should consider when they vote on January 3.

24 Comments on “The deeper, longer term implications of IAM’s Boeing contract vote January 3

  1. Agree that there are significant long term implications re Boeing holding a lot of high cards in the game.

    BUT – The IAM ( and SPEEA ) are not totally defenseless just cuz they have a contract and cannot strike. IF either or both get P***** enough with the Boeing version of ‘ survival ‘ they can- without fanfare or any written flyers simply

    WORK TO RULE – WORK EXACTLY TO RULE- WORK EXACTLY TO EVERY RULE EVERY TIME ALL THE TIME.

    And then grieve every time a supervisor/manager looks cross-eyed or makes an ‘ unacceptable ‘ comment by word or deed.

    So much for improved production rates.

    One of the reasons for the old games of a carpenter cannot pick up a cold chisel came about due to abusive management. And both sides lost. A old personal example. I first went to work at Firestone in LA in the Guided Missile Division building Corporal Missles ( the first nuke armed ballistic missile in service ). AS an engineer, there was no union. But there were the rubber workers and aero workers unions virtualy/ everywhere. I wore a suit as was typical in those days. One of the techs in the missile lab, knowing I was going across the floor to anothere area asked me to pick up a roll of solder from the tool crib. I did so without hassle from the crib. Until the next day ! My supervisor called me in and politely reminded me that I was not to do that again- he had received a grievance from the shop floor when someone saw me carrying the small roll of solder. Now what do you think will happen on the assembly line and on the flight line if every one does the equivalent ???

    IMO – if IAM decides to work to rule – many SPEEA types will also be sure EVERY t is crossed and not dotted .

    Maybe I should not call it a card game – but Chess PQ4

    • Don,
      Sounds very plausible.

      Is there any way, given the current and future state of Labor-Management tension, that some “Grand Bargain” could finally be arrived at that would improve the relationship and enhance Labor’s role and participation along with Company stability

      The current “antagonism” serves neither party . The IAM leadership has contributed to this situation and there is an equal share of fault on both sides.

      Are these differences intractable or will a change of management of both the Union and Boeing lead to some constructive changes

      • You are so right- both sides are angry and cutting off their noses to spite their face. How about public recognition that Everett workers saved the company bacon after the outsourcing disaster that has been the 787 program, then, with pride and hurt assuaged, the union agreeing to some sensible changes to pension and health benefits, with some of the takeaway and current bonus structure replaced with a straight profit sharing agreement ? Company profits, workforce profits, straight up. Bring as much work as possible back on site (it works better that way anyway), and get labor and management facing the same direction to fight the real enemy- Airbus! We have the skills and, let’s face it, tribal knowledge, to beat all comers if everyone gets on the same page.

      • IMO- by the time management changes ( National IAM and Chicago BA ) it will be too late. The old cliches – trust is hard won- easlily lost and One AW S*** wipes out 1000 attaboys have come true. RE Boeing – read the Book ” Turbulence- Boeing and the state of American workers and managers ” for some realistic views and data as the result of a long term study/ survey.

        As to the refrain re Engineers running the company in days past- not quite the golden age but it is significant that SPEEA never really had a strike until after the MDC buyout- and was an independent union. While there was a bit of spitting and shoving during contract negotiations, it generally worked out with little rancor.

        And the ‘ mood ‘ in the executive offices was much different.

        Can there be a ‘ grand bargain ” – I doubt it.

        Yes the old days of a backloaded pension are closing- and there are some good reasons for a 401k type ‘ pension”- since the days of long term employment and a company town are history. even so, the pension issues re cost is totally overblown

        Read Ellen Schultz “Retirement Heist ” for the real story behind 401k replacements, etc.

        As to the current mess – It still is my belief that the pension issue could reach a reasonable compromise along the general lines of the PVP but only IF the Union gets outside EXPERT help to have an eyeball to eyeball discussion with the Boeing bench.

        MY SUGGESTED PENSION CHOICE IF MELDED WITH BCERP BY SUBJECT MATTER EXPERTS- NOT UNION BRASS

        http://tinyurl.com/APENSIONCHOICE

        I’m nothing if not persistent 🙂

        https://sites.google.com/site/baunionhelp/home

    • Don, Suggestion for outside non union experts/consultants does not sound unreasonable….if anything, I would have expected a responsible Union to rely on professional consultants to help inform and guide the process.

      You are really stating that the negotiations have been inadequate/ unfair because the Unions are either not sufficiently informed or because their understanding is insufficient and they arrogantly (/) proceed to miss the opportunity to define or relate to the issues in a way that could be more effective. In essence, they have failed to do an adequate job and mislead /distort the ability for a meaningful give and take.

      Of course the Boeing “bench” is deep…..but if this is serious “play” Labor has to borrow some players to even the score. To do anything less is irresponsible and Members should understand this

      • Understand I cannot speak for IAM or SPEEA and most of my long time observations on pension issues relate to SPEEA. Even so, with the exception of some sideline checks with outside employee -centric pension consultants, it appears obvious to me ( including knowing over the years several members of the N teams at SPEEA ) that a serious- legal-actuarial look at the Boeing Pension by ‘ expensive” outside analysis of the BA pension known as BCERP is virtually non existant.

        In the late 90’s- after I had retired in1995, I was checking my pension calcs to figufre out what was the reason for a 5 year ‘ gratuity’ of credited service in 1995 to encourage a lot of old farts to bail. In the process, I had some help by a legal expert in such issues. Collectively we discovered that a subtle wording in the BCERP ( probably to keep plan from being top heavy ) often resulted in several months of N O pension increase. Which is nominally a no no under ERISA unless sufficient notice is given. But then we found that in 1994, SPEEA had agreed to so called flatlining of accrual including an accrual rate of ZERO. Since the union agreed- no union member was likely to be able to recover – and of course there is/was a 3 to 5 year bar. Long story shortened.. that issue still goes on !! Us 1995 retirees had got the 5 year boost in calcs which by and large made up for the ripoff. NO_ ONE before or since has ‘ broke even’ in that respect. Even the non union types. At that time there were a few lawyers- experts in ERISA- who were willing to push the case as a class action IF either non union or possibly union were to stand up. Didn’t happen then- and probalby too late now.

        But to add insult to that whole scheme- in the last SPEEA negotiations, a related issue was totally fubared by a Staff member under the guise- FUD of “scrap the cap” including a video presentation since pulled.

        It is also curious that AFIK, the Boeing PVP ( cash balance type plan ) was never pushed by Boeing TO the unions. But it has a neat hiddeen feature sure to entice any union type who goes to work full time for the union. The old BCERP had a 10 year limit on additional credited service while working for the union- not a secret in the IAM members – but unknown to SPEEA members ( Same Plan applies) But the PVP plan removed that limit!. Where is it hidden – its in the legal plan documents .
        And the BA Plan administrator is on record to me saying they need not put that in the SPD given to all employees under either plan !!

        The above may help some as background to my links below
        14) ALTHOUGH AIMED TO SPEEA RE THE STAFF FUD DURING NEGOTIATIONS, THE MESSAGE OF SCRAP THE CAP
        IS SIMILAR TO THE BOEING FLAPDOODLE. IT ALSO SHOWS THE SIGNIFICANCE OF THE OCT 31 DATE RE PENSION.
        http://tinyurl.com/SCRAPCAP2

        15) THE STORY OF JOELUNCHPAIL WAS DONE IN 2008. IT STILL APPLIES
        http://tinyurl.com/JOELUNCHPAIL2

        https://sites.google.com/site/baunionhelp/home

    • The thoughts in this article clearly articulate the issues at hand. The IAM members are between a rock and quicksand. There is no win/win result regardless of the outcome and I do not see any way for a win/win result —> unfortunately…

      Boeing has out maneuvered all involved and is playing powerball and have the upper hand and is playing it to the maximum amount…

      They have accomplished the same thing with IT, Supply Chain and Engineering personnel VERY successfully – primarily because they are not represented well (if at all)… Everything Boeing is doing has been blessed by Legal and HR as well as case law.

      Boeing does not care if people leave disgruntled. They are just happy long time employees are leaving. With such an older workforce, with great benefits and wonderful salary, the more that leave the better from their POV…

      It is close to a perfect storm – there will be some survivors —> just few and far between.

      The Boeing I joined 35 years ago is very much different than today’s Boeing…. Boeing is now in survival mode since most companies do not make it past 100 years. They will do anything to continue as a company – even if it means what made Boeing great is thrown out the door…

  2. Hey Scott!

    Good read on the contract issues but you missed the even bigger picture. It seems that financial markets are indicating that loss of the 777X will ultimately reduce the bond rating for the region and will cost more to bond and finance public projects (like transportation!) Impacts could be in the hundreds of millions……

    Bob
    [Impact WA 382 logo copy]

    Bob Uptagrafft
    Aerospace Specialist
    Project Manager
    T) 425-438-1146 x106
    C) 425-327-5545
    F) 425-438-2755
    ruptagrafft@impactwashington.org
    http://www.impactwashington.org

  3. Good article Scott. Will anybody listen?

    IAM members have been saying this since November. Some predicted mid-contract assaults by the company when we voted for the 2011 extension. And the one third that voted no then turned out to be oh so right.

    I voted for that extension and am now ashamed of that vote.

    And that may well be the reason nobody listens. Most IAM members know it will happen. Even yes voters. We have been trying to explain the ways of Boeing to everyone. yet the media, the politicians, and our own international president dismiss the facts.

    And don’t leave out the fact that even as Boeing keeps squeezing it’s workforce out of the middle class, it’s going to be back in Olympia to squeeze the legislature for every penny. And they will get it becuase down there, courage is always on vacation.

  4. The local media is stating that this latest threat to move work applies to the just the 777X wings.

    Well the IAM would not lose a lot because Boeing has stated that it won’t use our 31005 wing mechanics to do the work. As automation to the mix.

    So, if we vote no this week, we lose the wings but not final assembly?

    We already lost the wings since they won’t use our 31005’s on them.

    This proves that this Jan 3rd “deadline” is a sham.

    It sounds to me like Boeing is scared, having pushed to close to the edge. It sounds to me like Boeing is scared, having pushed to close to the edge. They are preparing for a no vote. They are preparing for the next round of negotiations. They are walking back the size and scope of the threats.

    • Steve,

      With all due respect, I wouldn’t bet that the Boeing is bluffing. The Union did them a big favor by stepping up when the 787 Program was figuratively “going south” (and literally, too) and this is how the Union is repaid: with spit in their eye.

      Boeing will let no good deed will go unpunished.

      • IMHO – no BA is not bluffing- they are simply getting as much as they can out of the workforce and the State. Anyone who really believes the Board has NOT already decided where to put the first 777x line is probably still waiting for the 10 Million check from kenya/narobi since they sent in the $1000 transfer cost.

        How can anyone believe the Board would ignore the guy with a 100 Billion check in hand who says I/we do NOT want another 7 late 7 issue, and suggest you build in one place ?

      • “How can anyone believe the Board would ignore the guy with a 100 Billion check in hand who says I/we do NOT want another 7 late 7 issue, and suggest you build in one place ?”

        Funny you should say that. I read that Emirates’ order for the 50 A380s has been firmed, but I haven’t seen a thing about the Emirate’s 777x order being firmed.

  5. Oh, I never accuse them of bluffing, Bluffing is for card games.

    I accuse them of LYING.

    Boeing doesn’t make decisions or strategies on the fly. They know what they want to do, and what options are best.

    They are predicting a no vote. So the wings will be either be built by MHI in japan, or by a vendor in a co-located facility. If they are willing to throw a threat to outsource the wings on one vote, then they intend to outsource.

    Final assembly will remain in Everett. I wouldn’t count out the possibility of a low rate spite line somewhere else.

    • Steve,

      I stand corrected. Thanks.

      So…I am curious. Considering how poorly outsourcing major parts of the 787 has gone and how poor has been Boeing’s experience with the South Carolina “Spite Line”, do you think Boeing Management has learned anything significant from the financial ruin of the 787 Program?

      • Jimmy, I do not. Which is why I make predictions but no guarantees. The IAM is often accused of being stubborn and recalcitrant. But Boeing’s executive management behaves like obsessed, petulant children who can be relied upon to stomp their feet and hold their breath till they turn blue.

  6. I am wondering where all you admittedly very valuable Boeing workers learned your job skills?
    There are a LOT of occupations these days where an individual has to invest several years of time/school plus a size able chunk of tuition (typically loans) to enter the pay arena that Boeing is paying its workers.
    Did Boeing pay you wages while you were learning your specialized job skills?
    Seems like a mighty sweet deal to me if you were getting income while you learned your trade!
    And your paying back what they have given you (occupation) with hate, venom, and rancor. I have to admit that as a complete outsider, I have trouble reconciling the situation!
    Signed
    Just a pilot whose dad worked at Boeing back when jobs were seriously appreciated.

    • Perhaps – but before the last 30 years that tuition was pretty cheap by the income standard of the days and came with a virtual assurance of getting a job/professional position that allowed the debts to be paid off. Put another way the great days of, in this case, Boeing were days of management/worker co-operation – not monetary gain.

      Must say I think the great winner here is Germany and Airbus – clearly the German model of social support while apprenticing and moral support provided/applied to both ‘sides’ to achieve an amicable settlement is far, far more effective than the slash and burn model of Boeing.

    • Cmorgan, the original four year degree was the apprenticeship. Who better to learn from than a worker that has skills and is willing to pass it on to a young person willing to learn? I think most people end up in blue collar jobs and should consider the apprenticeship programs. Unfortunately most manufacturing has been off shored. It now sounds as though Boeing is backing away from its hard line of moving jobs away (except wing work) if the vote is “no”, which I’m sure it will be.

  7. Dear Mr. C. Morgan,

    When you talk about commercial airline builders, the FAA allows Boeing to train its own workforce in their specific methods, instructions, processes, etc. An entire workforce of A&P’s isn’t feasible or even available. Even if they were, Boeing builds to its own FAA approved BAC specifications and every A&P would have to go through the same Boeing training anyway to be compliant.

    I was in class #7 for the 787 Manufacturing Technicians. I completed about a month of unpaid training before I was even accepted into the paid training course. We started back in 2007 at $12 per hour.

    We were then turned loose on aircraft like LN 1. An empty hulk that we were expected to complete. Nothing in our training ever prepared us for LN 1 through about LN 30, after which some hulls started improving in quality and condition of assembly, albeit barely. We more than earned our pay. What little paid training we had was a bargain compared to the cost to Boeing of what we had to learn on the job.

    As for the upcoming vote, I like the current pay and benefits, the challenges, the work, the people and the Boeing Co. in general. I’m proud to work for them. I’d be happy to sign an 8 year extension if we can keep what we have.

    I see no reason to give back anything to Boeing at this point. While the Corporate HQ is awash in success and record breaking profits, stock buy backs, bonuses, new aircraft orders, etc., the workers are not invited. Why now of all times do they slap us in the face?

  8. Steve Lucas’s experience on 787 is not the norm for other programs. There was a deliberate effort to keep old hands off the 787 program.

    On other programs, there is significant peer mentoring. The bulk of a new hire’s useful training is done by another IAM members, working with the new person, side by side, physically showing them how it’s done, and stay iwith them until they know the job. Then there is usually always another experienced member to get help from if a problem arises.

    787 techs were pretty much on their own. And all the shiny new tools, all the procedures, all the money, and all the management in the world changed nothing

    I don’t care if you have an A+P. You aren’t going to be efficient for quite awhile without peer mentoring form others the know the job you are being trained for, backwards and forwards.

    This is PRECISELY why 777x will NOT enter service on schedule unless it is built in Everett.

    It’s not the where it’s built. it’s the WHO is building it.

    So, what makes an IAM members so valuable? That’s easy. Other IAM members.

  9. As a college graduate it took me 4 years to find a job matching my degree. During those 4 years I worked part time and filled out every application and went to every job fair I could. Due to lay offs I lost my full time job. Then I reinvented my career and became a machinist. In my mind the job search process is a living hell and a pink slip is like a curse. Boeing may be bargaining fairly or giving blackmail. I’m voting yes because I know the gut wrenching pain of unemployment. I fear the local leadership doesn’t care and wants solidarity at the unemployment line. They organized a no rally. i wish there was a yes rally. This is a real dose of hurt if the no vote prevails.

    • Rachel – having been thru a few boom-bust cycles in my 30 years plus in aerospace before I retired, I can appreciate your concerns. I was lucky in the late 50’s when I got my degree. Of course you should vote in what you believe is in your best interest.

      The problem really is that neither a no or yes vote will make much difference in the short ( 5 to 10 years ) term. BA is already laying off in various areas, and that will continue. Obviously they want to speed up the retirement of the older-senior types to make room for the younger. And even in SPEEA, less than 20 years gives little protection on a seniority basis when it comes to layoff or evaluations.

      Its really hard to figure out why BA did NOT give the same ( poor) deal to IAM as they did for SPEEA- newbies get 401k, but BCERP was NOT frozen ( Yet?)

      Its tough to sort thru the BA PR by both BA and IAM, especialloy when the International has a different agenda than the local. IMHO- either vote will be challanged in court/NLRB as there are way too many piles of ddoo- do involved.

      As an assist to thosem who until now had no reason to question, review, or dig up a lot of pertinent info- I’ve put together a site which may help

      https://sites.google.com/site/baunionhelp/home

      I would encourage you to take a close look at some of the data and especially

      This spreadsheet can be downloaded and used to compare the Freeze date versus continued to 2016. Inputs are estimated
      percent increase for alternate benefit, and 5 year average as of march 2012 and credited service as of march 2012.
      Age can be input but does not enter into calculation Your union should have provided this.

      I think you will find that IF the plan was not frozen, most by 2024 would have lost about 1200-1500 month in benefits between freeze date and MY assumed change in std benefits over the remainder. Its an interactive spreadsheet.

      NOTE : Goggle docs does not allow for some reason a view of my excel files. BUT they can be downloaded. Two ways
      Browser says ‘ try again later ” Look on upper left with down arrow- hover says download current version – click on it
      Browser says cannot view — upper left under FILE – down arrow

      http://tinyurl.com/BCERPPENSIONCOMPARE

      Most likely, most newbies will be pushed into the 401k and with very little vested monthly benefits when they reach retirement age.

      GOOD LUCK !!

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