Supplier consolidation leading to unionization at some

By Bryan Corliss

Feb. 12, 2019, © Leeham News: While Boeing is enjoying “labor peace” in its Northwest facilities, a couple of aerospace industry suppliers are in the midst of contract negotiations with the largest union representing aerospace industry workers in the region.

At one of the new Collins Aerospace plants in Everett, those talks are contentious. Workers there staged a one-day walk-out on Jan. 17 after (according to union officials) Collins representatives refused to bargain with them.

The workers were back on the job the next day. However, the union representing them – International Association of Machinists District 751–filed a stack of Unfair Labor Practice complaints with the National Labor Relations Board’s Seattle office, accusing the company of, among other things, bad-faith bargaining.

Since the January walk-out, the two sides continued talks with the help of a federal mediator.

“The workers who generate the profits should share in the prosperity we create,” said Joshua Whitcomb, a mechanic at the landing gear shop, in a statement provided by the union. “This is very skilled labor, and not just anyone can perform our work.”

For its part, a Collins spokesperson in Iowa gave LNA a statement saying the company is “committed to continue negotiating with the union in good faith, and hopes to reach a mutually beneficial agreement.”

Collins is a 737 supplier

This is one to keep an eye on. The plant in question is the smaller of the new Collins’ two Everett operations – there are only 18 people in the union’s bargaining unit–but it’s the final assembly plant for landing gear for Boeing’s 737, 747 and 767 (including the KC-46). That makes it an important nexus in the Boeing supply chain.

It would not be the least bit surprising if there is more union organizing in the supply chain in the years ahead. In fact, it may be a perfectly rational response on the part of aerospace workers to the wave of mergers and buyouts that have swept through the industry.

It shouldn’t be a surprise. When two publicly traded companies merge, executives and shareholders all have lawyers looking out for their interests. Vendors and customers all have legally binding contract guarantees. Affected communities (through their elected officials) can bring at least some pressure to bear to ensure their interests are at least considered.

Non-union workers are key stakeholders who don’t have a voice in the process. This leads some to seek union representation.

That seems to be exactly what happened at the Collins landing gear plant, where workers voted in March 2018 to join IAM 751.

According to information from the union, the catalyst was news of the pending Rockwell Collins and UTC – and word that executives had change-in-control clauses in their contracts that provided personal financial guarantees in case they were laid off as a result of that merger. Shop-floor workers had nothing.

“With all the billions spent on buyouts, no one is looking out for us,” said Adrian Perez, a 14-year worker at the plant, in the statement from the union.

“We knew we had to unionize now,” he said. “It is an investment in ourselves for a better future.”

Private equity investors snap up suppliers

Something similar happened in 2015 when workers at Cadence Aerospace-Giddens voted to join the union.

Giddens Industries was a long-time locally owned aerostructures machine shop in Everett (WA). Boeing was and still is the main customer – today the shop provides machined structures, formed sheet metal pieces, subassemblies and parts kits for most Boeing programs.

In 2008, Giddens was acquired by Platte River Equity, a Denver private-equity firm that was putting together a string of six formerly independent aerostructures shops (five in the United States, one in Mexico) that it branded as Cadence Aerospace.

As supply-chain watchers know, there has been a tremendous amount of this kind of activity over the past decade. The increasing pressure that OEMs are putting on suppliers to deliver more for less has forced a lot of the family-owned stand-alone shops to either invest heavily to get bigger – or get out.

At the same time, the investor community has seen the kinds of margins that aerospace suppliers can deliver, and it’s been happy to step in to buy out the smaller shops that can’t or don’t want to compete in the new environment.

What usually happens, in these cases, is that the new owners will seek to lean out the operation as much as possible. This, typically, if not always, will include wage freezes and benefit cuts for the workforce. In extreme cases, the highest-skilled and most-experienced workers (ie., the best-paid ones) may be fired and replaced by entry-level hires.

Just like in the case of a merger, a lot of workers caught up in a private equity buy-out will seek out union representation.

Cadence-Giddens workers voted in 2015 to join the Machinists Union, and they approved their first contract in 2016. One worker said that the 85-cent-an-hour raise he got when that new contract took affect was the biggest pay increase he’d received since Platte River took over the company.

In 2017, Platte River Equity executed on its exit strategy for Cadence, selling it to another private equity firm, D.C.-based Arlington Capital Partners. Arlington brought in its own management team since the acquisition. (It has also added a seventh business unit, a machining and forging shop in Kansas.)

Talks between IAM 751 and the new Cadence management team are going into their second week. In a report to its Cadence-Giddens members on Monday, the union said that the two sides have made progress on non-economic issues while continuing to talk on pay, time off and benefits. The union said it plans on talks continuing through the end of the week.

Crystal ball

Is there a new age of universal aerospace unionization? Probably not. While unions win about half the time when they file for union elections, most organizing drives never even get to that point. The laws of the United States may say everyone has the right to join a union, but the rules for actually forming one make it very difficult to accomplish. It’s hard to see the Trump administration doing anything to lower that bar in the next two to six years.

Still, the recent vote by Boeing flight line workers in Charleston to form their own bargaining unit suggests there’s some momentum. So do survey results that show a majority of Americans support unions – younger people in particular. (A 2018 Pew survey found 68% of adults under 29 have favorable views of unions; only 46% have favorable views of corporations.)

 

16 Comments on “Supplier consolidation leading to unionization at some

  1. Been there, done that, got boxes of T shirts but no money.

    It will be interesting as those who glued those companies together give up and or retire in lesser than desired but hopefully livable status.

  2. Excellent story, and a nice peek into what is happening to some workers at this time of consolidation in the aerospace industry. With the big OEMs doing well, you would think they would have a greater appreciation for such a dedicated work force. But with LCCs (low cost countries) and LCSs (low cost states) readily available, or so they say, there seems to be an undue pressure exerted that is not necessary. Case in pointed, if you haven’t seen in the news this week, union airline mechanics and maintenance workers at American Airlines are now standing up to management for “requesting” them to overlook problems on the aircraft that aren’t on the job order.

    • The problem with all the LCC stuff is its also not up to education standards overall let alone infrastructure reliability (less corruption)

      There is a reason high tech stuff still gets made in the West.

      Tennis shoes who care is 10k are built wrong. A Hydraulic pump has to be built right and for aircraft more so as they are not off the shelf items.

      I know of one fastener mfg that after moving some production over seas, then had to open up a US based testing facility to ensure that the incoming met the specifications.

      It was found that all of it had to be inspected because you never knew form one lot to the next what you would fine.

      Their own or US sourced suppliers had that built in and if they said it was Grade 8, it was Grade 8.

      As entire contract depend on the product all meeting the spec, not just some or most of it, it was a big deal.

  3. “The workers who generate the profits should share in the prosperity we create,”

    There’s never a downside to this, is there? Who bears responsibility for losses?

    • @nyx – are you suggesting that the C-Suite guys are ever penalized when a company tanks? usually the golden parachute they get is more than they would have gotten if the company blew the roof off the stock market.

      if the company loses money, they lay off the employees. if they declare bankruptcy they often leave the employees hanging without even their last couple paychecks (and have often “funded” the pension plan in the form of now worthless company stock)

      it isn’t a lot to ask that labor share in the profits they help generate. they definitely are punished when the company doesn’t.

    • Everyone bears the losses. Workers lose their jobs, those who keep their jobs lose pay increases and benefits. Management is often reshuffled as well and the white color sales force often shrinks. Shareholders also take a hit.

      When the same companies return to profitability, as we’ve seen since 2011, wages are always the last to recover.

      • The basic tenets of an organized workforce are job security, better pay, benefits and work hours. From what you describe, it sounds like they don’t get any of that, and in that case, profit sharing with no downside would sound appropriate then.

  4. There is a downside called job cuts, usually the first measure announced after profits become endangered. Another downside is called work intensification, which is permanently applied, regardless of the state a company is in. So basically it is the workers themselves that bear the consequences of loss or lower than expected profit. Oh, but let us not forget here the inhumane sacrifice of lower bonusses that top management has to endure in such times, some heroes do not wear capes indeed.

  5. Morocco
    While the Northwest region still has the company versus union mentality, emerging aerospace clusters like Morocco will be the new location for FDI and producing aircraft parts

    “Morocco is a “competitive platform” for export, with monthly wages as low as $327 per month, compared to $338 in Tunisia, $430 in Turkey and $1,280 in South Africa. Local monthly wage was “almost 10 times lower than in Spain.” Government support of up to $5,600 a year per person can be provided for training new engineers, technical, and managerial staff at the zone, in the fields of aerospace and electronics.”

    “Morocco’s push for international investment in its aerospace sector may serve as a template for emerging nations seeking to develop domestic jobs and industry” ”

    ““Morocco boasts nearly 11,500 aviation professionals, of whom 50 percent are women. [Morocco’s] aerospace industry…plans to double its capacity and number of operators and create 23,000 new jobs by 2020. The Casablanca Free Zone in Nouaceur…is a designated industrial integrated platform with special support for investors in the aerospace sector,” “

  6. While comparing wages one must not compare exchange rates but how much rice/potatoes etc… a dollar can buy ..
    locally the thermometer (USD) looks the same but the temperature can be very different.

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