Boeing engineers voting on surprise contract extension

By Bryan Corliss
Feb. 25, 2020 © Leeham News — Unionized engineers and technical workers at Boeing begin voting this week on unexpected new contract proposals from the company that address two major areas of worker complaints LNA reported on last month: annual raises and paid family leave.

The proposals, which would extend the current contract by four years, came after SPEEA (the Society of Professional Engineering Employees in Aerospace) threatened to take Boeing to court over what it claimed were deliberate attempts by company management to hold down raises that engineers and tech were entitled to under the current contract.

Those threats led to talks between SPEEA’s executive board and Boeing managers, resulting in the proposed contract extensions. 

SPEEA’s seven-member executive board negotiated the extensions and is urging a “yes” vote. However, the union’s larger Bargaining Unit Councils (one each for both the engineers and techs, with a combined total of close to 100 representatives) did not go along with the endorsements.

There are two separate but related offers, one for engineers and one for technical workers. Voting is by mail. Ballots will be counted on March 9. About 18,000 Boeing workers are involved, most in Washington, but also in California, Oregon and Utah.

Summary

  • Union confronted Calhoun over pay on Day One
  • Proposal locks in annual wage increases
  • SPEEA gets family leave this year

First test for Calhoun

A “yes” vote would represent a victory for Boeing CEO Dave Calhoun in his first major union-relations test, as well as a win for the union, which issued a statement on Jan. 13, Calhoun’s first day on the job, claiming his newly inherited BCA management team had for years “contrived” to hold pay increases to an “artificially reduced lump sum.”

The six-year contract Boeing and SPEEA agreed to in 2016 had a more-complicated pay formula than most union contracts. But in very simple terms, the premise was that Boeing would ensure that its Puget Sound engineers would be paid salaries 15% above the market rate for U.S. engineers doing the same work, while techs would be paid 20% above market rate.

The two sides agreed to review nationwide wage data every year – the contract called out a specific annual report by a specific human resources-consulting firm – to calculate that figure. 

Boeing, in the 2016 contract, agreed to put an amount equal to 5% percent of the previous year’s total wages into a pool this year. Money to raise pay to keep engineers and techs at their target pay, relative to the market, came out of that pool. Anything left over was to be paid out as a lump sum. 

For example, the first year of the contract saw engineers get salary increases of 2.8% and one-time payments of 2.2% percent (adding up to a total of 5%). Techs got raises of 2.3% with one-time payments of 2.7%.

But from the beginning, the union expressed surprise that the market pay data Boeing provided was indicating that wages for engineers and techs was falling nationwide. That seemed counter-intuitive given low nationwide unemployment and high demand for skilled engineers and techs. 

As a result of that data, Boeing workers got bigger one-time payments with smaller increases to their base salaries. 

On Jan. 13, the union said it had found the answer: Boeing substituted the specific HR consultants report with another, resulting in salary increases below what workers were entitled to under the contract.

New proposal locks in raises

The proposed new deal does away with the annual review of national pay data and simply specifies annual salary hikes for the Puget Sound engineers and techs.

Instead, both engineers and techs would get 3.5% salary pool increases in 2020 and 2021, along with 2% percent annual lump-sum payments. Both groups would get another 3.5% salary increase in 2022, with a 1.5% lump-sum payment.

From 2023 through 2026 – the new years in the proposed extension – engineers would get annual 4.5% increases to base pay, with no additional lump sums; techs would get 3.5% annual increases to base pay, with additional 1% percent lump sum payouts.

More details are available on the union’s website.

12 weeks family leave

The union had gone to Washington’s Legislature in January to protest Boeing’s decision to exclude SPEEA workers from the state’s paid family leave program.

The state of Washington in 2017 adopted one of the United States’ first paid family and medical leave laws, granting workers 12 to 16 weeks of paid leave for things like a new child, undergoing surgery or taking care of a family member with a health issue. Workers themselves actually fund this; their employers take 0.4% out of each paycheck, which goes into a state-administered account that workers can tap into when needed.

There’s one exception: Workers who were covered by a collective bargaining agreement as of October 2017 aren’t eligible to take part until those contracts expire. Before these proposed extensions were offered, SPEEA’s 2016 contract with Boeing was set to expire in October 2022. 

Under the new offers, SPEEA-represented workers in Washington will be eligible for the state program on June 1, while union members at Boeing plants in California, Oregon and Utah will become eligible if their states adopt similar legislation.

In addition to the salary and family leave adjustments, the proposed contract extension also would make improvements to the company’s 401(k)-style savings plan and lock in out-of-pocket costs for health insurance to current rates.

It also would raise the target for SPEEA members to be paid under the company’s annual Employee Incentive Plan, which is tied to Boeing’s annual financial performance and typically paid each February.

Under the current contract, SPEEA members receive 10 days’ additional pay if the company hits specific targets, which amounts to a 3.8% bonus; if the extension is approved, the target would be raised to 5%.

This wouldn’t matter in the short term – Boeing announced in October, after its third-quarter earnings, that there was no way it would reach the financial targets, so none of its managers or white-collar workers will receive any Employee Incentive Plan payouts this month.

Machinists Union members in Puget Sound and Portland (OR) have a different annual incentive pay structure, tied to production, quality and safety performance metrics. They will receive a 2.2% bonus in this week’s paycheck. 

As has been widely reported, Boeing’s board has offered Calhoun a $7m bonus if he’s able to get the 737 MAX re-certified and back in service. His recently fired predecessor, Dennis Muilenburg, took $62m in long-term incentives, stock awards and pension benefits with him on his way out the door – but no separate severance payment, the company said. He forfeited an additional $14.6m in stock awards.

Boeing’s board has elected to continue to pay shareholders a dividend of $2.055 a share, even as suppliers like Spirit AeroSystems have cut dividend payments to conserve cash.

36 Comments on “Boeing engineers voting on surprise contract extension

  1. sounds like Calhoun is at least trying to appear to work with labor rather than consider them the enemy of all things holy.

    the big test will be the next Machinist union contract

  2. Those are pretty hefty annual increases that Boeing is locking themselves into!

    • Paying workers or paying executives?
      What was worker and executive pay in the 50s, 60’s, and 70’s?
      If workers indexed their pay to this era, as a ratio of CEO to the average worker pay, how much would the average worker be making now, a million dollars a year?

    • 4.5% incrase to base pay for enginners for 2023 through 2026 is incorrect and misleading. In fact it was combined with 3% for salary and 1.5% for promotion fund. Promotion fund is not valuable because no employee get promotion every year. Basically it is such a bad deal for employees. But executatives will be still taking millions bonus no matter what..

      • The promotion fund is subject to rollover into the salary pool for the next year. Boeing is currently only using 0.4% or 0.5% for promotions. So either they promote more people, which is seen as an issue in the engineering community, or the funds roll over into the raise pool for the next year so that 3% becomes 4%.

        • Not working for Boeing, but I’m curious about this salary pool concept. What happens if the workforce shrinks or grows, is the pool adjusted proportionally?
          What happens when someone retires, does their salary stay in the pool, or is the pool decreased to a starting salary for a replacement? If that was the case for a 25 year career, 1.5% is an anemic career wealth progression. 1.015^25=1.45. For most professions, I would imagine a veteran experienced worker should make at least twice that of entry pay. At 2.8% wage growth for time and experience, 1.028^25=2.

          • So to address “promotion pool” this simply means for say the Engineers who are termed “Professional Bargaining Unit”, their pool for promotional funds and out-of-sequence raises is determined by the pool of engineers at the time of annual salary discussions. So what this means is if you take the entire sum of the engineering base salaries, add them together, then take 0.5% as it is in the current contract, it means for people looking to be promoted (not a raise, but increase in responsibility) this is the funding source. Promotions do not happen among the entire population of the pool year to year.

            Raises on the other hand are a separate pool. The calculation is the same but the distribution is based on end of the year assessments, how much salary does the employee make with respect to a market reference, and how they compare to their peers. So a pool of say 3% annually does not mean all engineers get 3%. In the current proposal it means future it is a minimum of 2% raise and an additional 1% that will be skewed towards high performers, so their effective raise year to year would be more like 4-5%.

            The promotion pool factors in such that if it is tripled to 1.5%, then if Boeing is not actively promoting more engineers to positions with more responsibility, then the remaining funds shall be rolled over into the next year. So that 1% margin for high performers turns into 2%, which can translate into higher year-over-year raise.

  3. Isn’t Calhoun the same guy who publicly admitted that Shareholders DIVIDENDS would not be affected by the Boeing Chaotic events?
    Whose Subsidies are they going to use now to payout those Dividends, an directly affect Boeing’s Workers and/or Suppliers in the process?

    • Did you not know companies can borrow money?
      Anyway the rest of the company outside the 737 is doing OK, why not pay out the shareholders for those profits .

      • Look at “DIVIDENDS” etymology 🙂
        https://en.wiktionary.org/wiki/dividend#Etymology
        At the core it is about dividing up / shared profits from shared ( shareholder community ) ownership.
        Even if this has been heavily deformed in scope of US centric capitalism.
        Borrowing money to show profits is perversion in context? Could this even be made to fit under the tag “Ponzi Scheme” 😕

        • Uwe, we’ve been over this before.

          Stable policy is the practice of keeping dividends stable over time, with the amount determined by long-term average profits, and a small increase each year, if possible. That is maintained even in a downturn, if possible. Boeing has that ability.

          Boeing has the needed equity to back up their borrowing, and the reasons for the borrowing are very clear (loss of cash flow and compensation). They will be resolved by resumption of cash flow and write-downs resulting in tax savings.

          In this article, Boeing is also looking at increasing compensation packages for their employees, not just shareholders.

          Boeing dividends are consistent with their competitors in the aerospace industry. I’ve given those numbers before.

          European views on dividend payout are different. Here is some investment advice for those considering both American and European stocks:

          https://seekingalpha.com/article/320237-european-vs-american-dividends-6-things-to-consider

          • Yes a very good summary. As well it’s good to remember US tech stocks hardly ever pay dividends at all during their growth stages, and investors are happy with that too.
            Boeing isn’t taking people’s first born to keep dividends going.

          • You certainly describe the US trend to misleading wrappers in every domain well.
            Nonetheless : this is an abomination.

  4. But look closely at the retirement- benefit package(s) compared to say a decade ago.

  5. I think the big picture is, we were screwing people and Washington state for our shareholder, not for any competitive need.

    The irony is when things going to hell in a hand basket, then they start backup up and forking over.

    There are lies and then there are damned lies. Paying the dividends in these circumstances is equally insane.

    What they are doing is borrowing money to pay dividends.

    Just when you don’t think you can be shocked, comes a bigger bolt of lightening.

    Grab it while you can, they will want it back soon enough.

    • Boeing doesnt just make 737s so why shouldnt they have dividends for the other profitable parts of the business. The borrowing is in reality to cover the extra 737 costs only , thats how the accounting for each program in each of Boeings divisions works. Its not you but the shareholders who own the company and like employees who expect to be paid, the type of stock that Boeing is means the shareholders expect to be paid too. If interest rates were much much higher and Boeings credit rating was much lower the calculations might come out differently.

  6. Boeing kept the dividend the same in 2020 as in 2019, after a decade of steady increases. So it is a change in that sense. It could also still go down in future years, it just depends on the overall health of the company.

    • You don;t put out dividend when the company is in dire straights.

      This is nothing more than an attempt to keep management stock up so they can reap the gains no matter what it does to the health of the company.

      The single biggest cash return and most critial segment is totally stopped. We have no idea when it will get going, its one drip drip drip after another on new problems.

      Borrowing money to pay dividends? You got to be kidding.

      Is Boeing going under? no.

      But this is the biggest single crisis in Boeing history. And its on all fronts. We have no clue what the 777X reviews will show. There may well be failures in wring and protein of system there as well.

      The 787 program illegally removed lightening protection from the wings and that too is going to play out as an issue.

      The KC-46 is still fumbling along.

      They can’t even make an aircraft without FOD in the tank (and the fuselage on KC-46 along with all its other issue)

      They are forced to give up their holy subside from Washington state (and it does not matter, bottom line its a US subsidy)

      They are buying the unions off now. Why? Because they are so hosed up they can’t afford for it to get worse.

      And Boeing is paying a dividend?

      At least the band on the Titanic served a purpose in trying to keep calm. Because things were going to get really h really ugly soon enough.

  7. Off Topic: Pretty quiet on the posting front and I thought this was a huge thing.

    ANA has put in a 787 order, hidden in the numbers is the sift to Gen-X from the Trent.

    https://simpleflying.com/ana-places-another-boeing-787-dreamliner-order/

    NZ was he first and I predicted there wold be others. ANA is huge in the 787 purchases vs NZ who is important but not huge.

    Looks like the airlines have had enough of the RR debacle and are voting with the engine choice. Others will pay attention.

    The MAX could be next.

  8. Also off topic, but we had an earlier discussion of legislation to address regulatory issues. New legislation has been introduced that would do the following:

    1. Restore some ODA authority to the FAA, reversing some of the 2018 changes. The FAA would be more involved in establishing selection criteria and selecting DER’s, and also regulating & auditing them on a continual basis.

    2. Prohibit DER evaluation by the employer from being based on production goals, but instead on safety goals.

    3. Provide whistleblower protection for employees reporting serious defects, including monetary reward as a percentage of any fines collected.

    4. Enable the FAA to review and prohibit sales to foreign airlines that don’t meet safety standards.

    The FAA would need to work with EASA on the last part, otherwise those airlines would just switch vendors. But these all seem to be generally moving in the right direction.

    • Prohibiting foreign sales is out of the question, even if it’s for a laudable purpose. US laws don’t extend beyond the territorial limit, other than those airlines that fly to US airports. It’s a never ending task to try to evaluate their standards and a waste of effort

      • Well currently legality are being stretched beyond even plain print and upheld so I would not jump on that wagon too soon.

    • “1. Restore some ODA authority to the FAA, reversing some of the 2018 changes.”

      Same/similar process deficiencies observable for MCAS and 787 batteries ( the things that really made a splash.)
      so backtracking to the pre 2018 situation will effect nothing. You’ll have to look back to before 2000 for a potentially saner setup that could be reconstituted.

      We’ll see horses singing arias long before that happens.

      “4. Enable the FAA to review and prohibit sales to foreign airlines that don’t meet safety standards.”

      Quite amusing position: the biggest number in “not meeting safety standards” ( and some other misdeeds ) is local to US culture.
      German saying: “erst mal an die eigene Nase fassen”

      Why am I reminded of Randy Boeing’s ( Tinseth) writing style when I go over your posts?

    • I think the idea was to address all the problems in a comprehensive way. As I wrote in an earlier post, the emerging trend is to look broadly at safety cultures. This legislation is trying to do that inside Boeing, but also outside. Since as Duke says, the FAA has no jurisdiction outside the US, the only way would be to limit sales.

      The other pending legislation is looking at the impact of automation on safety, and implementing the safety recommendations of the NTSB and DoT OIG. There are also two more DoT OIG studies pending that are looking at safety

      These actions are consistent with the aforementioned focus on safety culture. This is also just the beginning, there will be more legislation coming, and these proposals may yet be modified before becoming law.

      These changes to FAA are appropriate. Future legislation will likely go further, we’ll have to see.

      • Yea its something of a morass/conflicted mess as the FAA is also the Cheeleader for US Aviation. Who thought that was a good idea is nuts.

        Its a start, not a finish.

        FAA needs to be broken up, spin off the Traffic control end as well.

        NTSB is a great entity, occasionally some of its recommends are unrealistic. Retrofit of black boxes was an area that, ok, going forward yes, but………. And they keep wanting more data points.

        Ok, why do we need more data points? We can’t put camera in the cockpit like there should be (why are pilots immune to workplace surveillance ?) We used to not be able to lock cockpits as that interfered with the PR grandstanding image they wanted (or many)

        NTSB recommended Boeing change the FLCH Trap (when it gets a name its a problem) – that in fact was a hell of a good recommend and low impact and cost but Boeing refused and the FAA would not force them.

        I am open to anything that makes the system better.

        But I spent a lot of years where they talked safety at work and then did just the opposite.

        So in there is the issue with lack of surveillance to ensure that its not just BS. If you don’t enforce your existing standards then more rules don’t do squat.

      • What you write could perhaps happen in another, completely different timeline.
        But definitely not in this one. i.e. your narrative is nothing more sophist fakery. 🙂

        • Well I promised Scott I would try to be better, though I never thought I would achieve sophist status.

          When I was working I had goals, I seldom achieved them.

          But I knew what they were and that they were of a high standard.

          2 + 2 always equaled 4, not some bizarre spiral off into how the US forced Japan to attack it ( that was some sophistiseming I thought, but I may not have had enough advanced education to parse it out correctly)

          • How can your goals be of “high standard” when
            you appear to lack understanding of your environment ( or what other posters write )?

    • “4. Enable the FAA to review and prohibit sales to foreign airlines that don’t meet safety standards.”

      Uhhh comrade Rob- that has to be the most insane comment you have made.

      While the FAA or similar could-should restrict planes not meeting FAA-XYZ agency standards for safety, etc from flying or landing in our airspace ( emergencies excepted )
      BUT To suggest or restrict or prevent an American company from selling to a foreign airlines a commercial plane ( military is a separate issue ) is absolute marxism, socialism, communism, or similar. None which have ever worked in then long run- and might be considered a dictatatorship.

      I urge you to reconsider that thought-comment- supposition.

      • Bubba, it wasn’t my idea, it’s in the legislation. You’re welcome to look it up. It may not be passed as such, we’ll have to see. I agree it would be controversial.

        It’s an attempt to get at the fact that a US company can be badly affected by things outside of their control, or the FAA’s control, after sale. We’ve never seen anything remotely like the backlash that’s occurred against the MAX. If that is truly the world of the future, then some effort will likely be made to put protections in place.

        As I said, the focus is also shifting to look at overall safety cultures. That’s being done at Boeing, it should be done at airlines as well. I think you will see the FAA mandated to take a larger role there. Not just foreign airlines, but US airlines like Southwest as well.

    • TW, I think he was conceding that RR will not sell enough of those engines to break even. But there is still value to had in operational experience and learning, so he is making the best of the situation. Not much else he can do, under the circumstances.

      • Afaics a question of text understanding.

        What he IMU says is that they will invest further funds into improving the product instead of showing profits now. ( Again IMU an error P&W resp UT made )

    • It used to be claimed that engine makers planned to make it up on parts sales.

      There is a strategy of taking a loss to be in the market, and be ready for change, rather than dropping lines as Ferd Motor Company did (only to be caught without a small V8 in pickemups when gasoline prices went higher, whereas Toyota had small and large options). Of course losses have to be made up somehow.

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