Leeham News and Analysis
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Leeham News and Analysis
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Boeing IAM vote in 2 days; approval a hard sell
By the Leeham News Team
Sept. 10, 2024, © Leeham News: Boeing’s touch labor union, the International Association of Machinists and Aerospace workers District 751 (IAM) votes in two days on a new labor contract.
Although a Tentative Agreement was reached Sunday and union leadership endorsed it, getting 50%+1 vote to ratify the contract appears in trouble. A concurrent strike vote requires a two-thirds majority for a walk out, and there is split opinion whether this high threshold can be met.
This will be a hard sell for IAM leadership. The deal makes progress in the areas IAM members identified as priorities, but falls short of the union’s stated goals in most of them:
Contract details
Pay: Boeing’s offer of 25% general wage increases is well below the 40% the IAM targeted. Improvements in starting pay of $4 an hour will only benefit Boeing’s most-recently hired Machinists, and is probably the bare minimum Boeing needed to do to be competitive in the Seattle and Portland labor markets. Movements of some categories of workers into higher pay grades are wins, but not for everyone. The deal also didn’t address the cost-of-living adjustment formula, which historically has captured 70% of inflation. Boeing is offering a $3,000 cash signing bonus.
For comparison, after their one week strike last year, Wichita Machinists got 23.5% wage increases over four years, plus guaranteed 2% bonuses and a cost-of-living formula that matches inflation up to a 3.5% cap. Spirit paid a $3,000 cash signing bonus.
Retirement: Machinists wanted pensions restored. They’re being offered a second 401(k) with a defined company contribution, which is not the same. This is a major issue for older Machinists who saw their pensions frozen in 2014, and while they’re not the majority in the bargaining unit anymore, it does mean there’s a baked-in 40% who are inclined to vote no on the contract because of this issue alone.
Job security: The union asked for a commitment that Boeing build its next new airplane in Puget Sound. Boeing’s promised that any new airplane program announced in the next four years will be in Puget Sound. That doesn’t mean much, unless Kelly Ortberg dramatically moves up the time frame on the NMA from Dave Calhoun’s “mid-2030s” projection. He’ll need to announce that in the next 48 hours, for it to be a factor for the Machinists to consider.
Work-life balance: Machinists in Spirit in Wichita (who will be Boeing employees in 2025) have eliminated all mandatory weekend overtime. Seattle and Portland Machinists with this deal would have less mandatory weekend overtime, but managers could still come to them on Friday morning to assign them to work Saturday and Sunday. Managers would still be able to keep workers on the job for up to two hours after quitting time on a weekday, which is better than the four hours they can mandate now. Twelve weeks of paid parental leave is a win — especially for the bulk of 20-something Machinists who make up a significant chunk of the workforce and are soon to become parents — but all it does is put the union contract on par with benefits that Oregon and Washington state laws mandate for non-union workers.
Healthcare costs: The Boeing offer lowers Machinists’ out-of-pocket medical costs by 9.3%, which is a win, perhaps the most-clear win for the union in the offer.
Seat at the table: The union asked for a seat on the board of directors; Boeing’s offering an annual meeting between IAM District Presidents and the board of directors, plus semi-annual meetings with Ortberg and CEO of Boeing Commercial Airplanes CEO and other BCA vice presidents. In addition, a joint council would meet monthly to discuss safety, quality and training issues that impact union members. This would be an improvement on the current state of affairs; Boeing CEOs haven’t had regular face-to-face meetings with IAM leaders in Seattle and Portland at least a decade. But frankly, Kelly Ortberg should have had this on his personal to-do list; it shouldn’t have been something Machinists had to negotiate for.
Social Media
The response to the offer on social media — while hardly a scientific sampling — was unanimous against the offer on Sunday morning.
On the union’s official Facebook page, the majority of commenters posted a single word — “Strike!” — while others posted gifs mocking the offer. At the Rosie’s Machinists 751 Facebook page, an unofficial site run by union activists, commenters deemed the offer a “historic lump of coal” and a “historic slap in the face.” One said Boeing’s offer of a $3,000 signing bonus was a signal the company wasn’t serious about reaching a deal.
Our assessment is that is highly likely that a majority of Machinists will vote to reject the offer on Thursday. The only question, in our minds, is whether enough of them will vote to strike. IAM bylaws require a two-thirds majority to call a strike; if the strike vote fails to get that supermajority, the contract will be ratified by default.
But a former CEO of a supplier predicts “100%” that 751 members will vote to strike. And a panel organized by Bloomberg last week also believes a strike is likely. The panel was broadcast in a webinar before the Tentative Agreement was announced.
BA management would have done well to take a basic lesson from ancient history (and common sense):
“When Caesar came to power, he doubled the pay and the annual rate became 225 denarii and it remained at this rate until the time of Domitian. Polybius tells us that substantial stoppages were deducted for food, clothing and replacement of alms. The net amount would have to be satisfactory or mutiny would have broken out, as in some cases it did. The next improvement in pay was made by Domitian, who increased the pay by one-third by adding a fourth stipendium. Soldiers’ pay was made in three instalments of 75 denarii in January, May and September. Domitian changed the intervals to three monthly and thus increased pay to 300 denarii. Under Severus he raised pay once more to an estimated 450 denarii. Caracalla gave a substantial increase of 50% probably to 675 denarii.”
https://www.vindolanda.com/blog/roman-soldiers-pay
And look how the Roman Empire ended up!
It sounds like All Baloney!
Nice play on words but watch it anyway.
If IAM strikes, I’ve got to think that Boeing’s days in Puget Sound will be numbered.
Nope, Boeing will give them exactly what they want.
They don’t have a chance plus Boeing won’t put their best offer as their first? Who does that?
The alternative being?
FOD-ville down in SC?
Weren’t the messed-up 787s from the SC line being sent to WA to be patched up?
They were being patched up both at SC and at PAE and many were built in both SC and PAE.
So yes we make fun of SC but a door literally flew off an aircraft from an aircraft built in puget sound.
Opus:
I don’t believe any of the Shim Issue 787s were built in Everett.
And yes the MAX was a Seattle product, keeping in mind it was a Boeing process (lack of one or ignored one) that was the cause.
The real remaining issue is who closed the Blank Exit? I don’t believe that was an authorized action.
Those 787 are now all in the Everett facility. It’s about a 3 month fix on each.
3 months per frame?
That must incur a hefty price tag 🙈
No , really, its free!
Now Boeing should have offered to keep messing up 787s so there is a career for the mechanics in Everett to fix them.
Obviously its a fine line. For those who don’t get it its a double pun.
Strikes end when one or both sides begins to contemplate the unthinkable. Either the IAM realizes that the benefit from holding out is not worth it…or the pain that management feels from lack of deliveries feels so great that they capitulate.
Its one big game of chicken with both sides guessing at each others pain threshold. I will say that it is rare that anyone truly comes out ahead in a strike considering the collateral damage.
You have to wonder if the Union Leadership is that far out of touch or if they know its a negotiation and a, well if that is the best you can offer we will take it to the house but don’t expect it to fly!
And you are right on the impact doing no one any good. I hope for continued negotiations.
It was stupid the last time, they struck and then caved. If you are not willing to take the hit then don’t strike in the first place.
Boeing is never in the drivers seat if the workers are willing to stick it out. Boeing has to cave.
Boeing also knows that strikes hit their limits and can prevail (I don’t say win, no one wins) if they hold out long enough.
Right now the timeline is shorter due to the position Boeing is in but its a time aspect.
It’s quite interesting that the contract will apparently ratified be anyway unless 2/3 of IAM 751 members vote to strike. Not a great feature for the union.
There are several contract votes where 50% vote for against a contract but not for a strike, so the contract goes into effect by default. It is odd. The first vote seems more symbolic than pratical.
Clearly Vincent does not understand the situation.
Rejecting the contract does not mean they agree to it.
I am not sure the offer occurs either as far as the pay and bonus. I believe its all on hold and the previous contract is the ruling deal.
But if its turned down and no strike voted in then its back to negotiations.
Two ballots will be voted on the 12th. The first is accept – reject contract off and requires 50% +1 to pass. The second ballot is strike authorization, requires 2/3 affirmative to pass.
I stand corrected.
Vincent has it right per the Air Current. Reject the contract and the negotiated offer takes place.
Only if they strike does it not.
Been too long since I dealt with Unions (or not long enough?)
I find it fascinating they threw the union this promise of building the next airplane in Puget Sound. First off, with $58 billion in debt there’s no money do this, secondly they should focus on getting their current products in order.
But McNerney promised in the last contract he’d keep a 787 line in Seattle and a year later he moved it all to Charleston.
The IAM gave up the pension in 2014 and that was a big mistake… don’t blame them for trying to get it back. After all these executives are well cared for after they leave the company…
Inflation is hovering around 20%. A 25% pay increase over 4 years sucks.
It was a throwaway promise. There was no actual promise to launch an aircraft during the next contract.
However, it does set a bias whenever Boeing gets around to it, which is likely to be the following contract.
Other than pilots, there won’t be many people getting 25% pay rises over the next four years for doing the same job.
Inflation is back down to 3% and heading further down back to the 2% range. This deal represents a likely 15% real (after inflation) pay increase on a forward looking basis.
The current 2.9% US inflation rate doesn’t undo the cumulative effects of many prior months of much higher inflation rates.
Many daily products/services are (more than) 20% more expensive than they were 3 years ago — including groceries and insurance premiums, for example.
That requires compensation.
The 2014 IAM agreement had a COLA component built in that did protect the workers when inflation was “normal” but they did fall about 11% behind as a result of the high inflation of the last three years partially offset by 4% “real” increases during the contract – so they are now about 7% behind in real terms compared with where they were in 2014.
So yes they arguably “deserve” a catch-up of something a bit below what has been negotiated.
They havnt had a raise in over 10 years!
@B Levitt
Correct me if I’m wrong, doesn’t the proposed contract take away the yearly bonus? What’s the real wage increase when this is factored in?
new wage for top grade 12 is $57 per for straight time ($116k)…. is anyone else paying that wage for factory personnel in Puget Sound?
Sounds like the Union guy Holden thinks they’ll strike.
Link: https://www.seattletimes.com/business/boeing-machinists-union-chief-expects-members-will-reject-deal-strike/
Grade 12s are not factory production personnel. They are the equipment maintenance folks, electricians, crane mechanics, etc. 57 per hour for those crafts with 6 years experience, (or more) is not market leading. The highest grade in the production system was Grade 9, bumped to Grade 10 with this doomed contract.
Yes you are correct Grade 10 top wage will be $55 an hour or $112k straight time
Grade 9 top wage will be $54 an hour or $110K straight time.
So what is the alternative wage and benefit package for Boeing factory personnel in Puget Sound region if Boeing starts moving 737 production to South Carolina in the next 2-10 years?
What if the 777x is canceled, only a couple of global customers and 13 years late (note Emirates are now buying use A380 for their capacity needs which will be operated until 2040)
Maybe start with the second 737 FAL (instead of Everett) and relocate the incoming new 6 wing riveters (ones replacing the 1960 vintage WRS) to SC Clean sheet factory floor layout could improve production flow and more automation! (less labor content and lower cost workers)
A few years ago it was said Spirit Aero was too big to fail and they did. Having current work packages guaranteed is more important than a couple bucks more an hour!
Let us take this a step further
Boeing says the next new single aisle will be built in Puget Sound region So let take that for its worth. One FAL in Everett Did Boeing says exclusively in the PSR? or will they have to follow the Airbus FAL model and have many FAL in several countries (e.g. Germany, France, US and China) to maintain their global market share (e.g. 40% of all commercial aircraft will be delivered in the next 2o years to Southeast Asia)
What about wings for the new single aisle (any being said about wing production being guaranteed in PSR?), most likely some type of composite, non autoclave, the cost new mfg infrastructure will be expensive (for 80 shipsets a month) and other countries will support their aircraft industries to get that high tech (e.g. DAE and India). or US based wing production for US customers in South Carolina and ship to the Everett FAL
Lots on the line here, getting guaranteed work package details is more important than a couple bucks in an hour
People do not look at it in that view.
Boeing is not going to move 737 production out of Puget Sound.
The next aircraft?
“Boeing strike potentially days away after union [unofficially: ed] rejects company’s latest offer”
“The worker who spoke with KIRO Newsradio said he’s been a Boeing machinist for 10 years, and his fellow workers are angry over Boeing’s proposed contract and angry at union leadership for recommending members vote to accept Boeing’s terms.
““The union is saying we should take it, but we’re not going to take it,” the anonymous worker said. “It’s awful. People are mad. We’re going to go on strike.”
“A strike would result in Boeing’s jet plants in the Puget Sound region shutting down, along with other parts plants around the Pacific Northwest. It would also create potentially harmful financial impacts — including credit ratings — adding to the growing list of recent issues facing the giant airplane manufacturer.”
“On Monday, according to The Seattle Times, hundreds of machinists marched in protest inside the Everett plant, then walked outside and chanted, “Strike! Strike! Strike!” The anonymous Boeing employee said workers in every plant are more than ready to hit the picket lines.
““I’m ready to go on strike for two, two and a half months,” he said. “Most people have squirreled away, we’ve been expecting this.”
“Union members will vote on the latest contract offer this Thursday. Holden told The Seattle Times he expects they will reject the contract and go on strike from Boeing at 12 a.m. Friday.”
https://mynorthwest.com/3985674/boeing-strike-potentially-days-away-union-rejects-company-latest-offer/
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Good lord — a strike lasting 8-10 weeks will finish Boeing.
I hear what you are saying a 2 month shutdown is terrible. But the max was shutdown for something like 21 months and the 787 has gone extended periods without delivery. As has been pointed out by several on here, the marginal profit on deliveries is nil at best given the penalties and rework involved. By scale a 2 month production gap is a speed bump. Boeing finances have been running on investor confidence and not on fundamental balance sheet strength for years. Also consider that Boeing wouldn’t be paying its employees either during this time.
The two-year MAX shutdown forced Boeing to take on the first $40B of its current debt load.
It’s currently burning through $1B per month — what will that amount rise to when deliveries out of WA halt altogether?
A strike will almost certainly precipitate a credit rating downgrade — which will automatically trigger an extra 0.5 percentage point increase in interest on existing debt, corresponding to an extra annual interest burden of several hundred million dollars.
This will be more than a bump in the road.
Interesting they can squirrel away 2-2.5 months given such horrible inflation/pay. The 15% granted in 2008 during the great financial crisis was shocking. Company is struggling 25% is fair but I guess no one really cares about the company. For the record, executive compensation is primarily paid through stock options diluting shareholders, not from company revenue. Executive salaries are actually quite small
The stock given to executives has to be purchased by the company on the market — so it costs the company money. That’s why buybacks are called “buybacks” — the company has to “buy” them.
So, executive compensation costs the company a heap of money…and the company gets very little in return. For example, Dave got $33.8M last year…for (further) running the company into the ground.
Tangentially related:
“Boeing Must Be ‘in the Green’ Before 737 Max Cap Is Lifted”
“Boeing Co.’s quality control monitors must turn solidly green before US aviation safety regulators will be convinced the planemaker can support higher production rates and exit output limits imposed on its 737 Max jetliner.
““We have made it very clear that those metrics need to be in the green before the production increases above a certain level,” Mike Whitaker, the US Federal Aviation Administration’s top official, said in an interview in Washington on Tuesday. “That’s going to be our focus over the next couple of months to get clarity around that”
https://news.bloomberglaw.com/international-trade/boeing-must-be-in-the-green-before-737-max-cap-is-lifted
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On a related note: BA shipped 32 MAXes in August, at least 9 of which were from the parking lot (9 for China; some others probably went to India). That puts the current MAX line rate at 23, at best.
https://finance.yahoo.com/news/boeing-delivers-40-jets-august-150508592.html
Leeham has done an outstanding job of breaking this down. Well done.
Ortberg may well have his hands tied as well, a CEO works at the boards direction. I would hope he was smart enough to have wider latitude.
Boeing should open end the offer of the next aircraft being built in Everett.
A seat on the board as Leeham has noted should be a slam dunk. Keep in mind there is a Calhoun faction on the board.
I agree contract will be rejected and I hope for the sake of all no strike. I believe you can get a strike vote but put strike on hold while negotiating.
They want a seat on the board, put some skin in the game, and have stock options negotiated in.
Its about money.
And yes, there will be a strike.
From the above article:
“..IAM bylaws require a two-thirds majority to call a strike; if the strike vote fails to get that supermajority, the contract will be ratified by default.”
Yes, per above, I will repeat, I was wrong.
Strange stuff.
Curious if Boeing could up the offer before the vote?
I don’t think Ortberg thinks its an offer that will fly (pun) but the Boeing board may still be that stupid, aka the Calhoun faction.
We’ve been told the are days for numbered for the last 18 years, that’s an old story. The C suite people caused this debacle and it’s squeezed enough out of us. We are ready to fight.
You are entirely within your rights to fight…and it’s necessary to make a stand when being exploited.
But realize that you are mutinying on a sinking ship…so it’s not at all sure that you’ll achieve any long term gain.
An interesting observation
https://x.com/teachmonkey2fly/status/1754951169577787864
Sums it up very thoroughly.
Excellent link, Pedro. Thank you.
I think I missed something back there- Two votes-First a vote to decide whether to ratify or reject the Boeing contract offer, then a vote on whether or not to strike?
If the first vote is to ratify, is there a second vote?
If the first vote is to reject, the rank and file might vote to strike or might vote to work while further negotiations take place.
Is there any sense in default acceptance of the contract that was just rejected?
If the first vote passes, there is no vote to strike.
That is why I fully expect the first vote to fail. It is a symbolic vote to make a point. A vote to strike has real implications.
Trans said
I agree contract will be rejected and I hope for the sake of all no strike.
My understanding is that the vote will end with a walkout or an acceptance the day of the vote. Remember the strike vote last month was 99 percent. Tbe local hasnt posted allowi g tbem the any other options
All largely irrelevant.You need good people to build aircraft, the good guys walk if not paid enough, the bad ones hang around and go on strike
“…the bad ones hang around…”
Look how long Dave has hung around…and he’s still hanging around as “special advisor”.
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Bit disingenuous to suggest that only the “bad ones” hang around. There are lots of reasons why a good employee may (have to) stay at a bad company — e.g. age, health issues, necessity to be near a particular school / institution, etc.
It seems here that a lot of good guys were “walked” because they were paid too much (at least in the short-sighted view of Boeing management). Having been “The most expensive old guy” I am familiar with the management decision.
A bit of history, ….. in 2008 the contract was rejected, and the vote to strike passed. The union leadership and Boeing extended the expiring contract for 48 hours…..to try and hammer out a better agreement..
57 days later………
So, Thursday at midnight may not be definitive.
“Emirates set to receive its first Airbus A350 aircraft in October”
“Emirates is set to receive its first Airbus A350 aircraft in October, with a total of 5 Airbus aircraft expected to be delivered to the airline by the end of this year.”
https://www.gulftoday.ae/business/2024/09/11/emirates-set-to-receive-its-first-airbus-a350-aircraft-in-october
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So, Tim will soon be playing with his new AB toys.
Meanwhile, over at BA, the 777X program is in limbo, the 777 line is in total chaos, and there’s a strike looming.
Will Tim finally throw in the towel and defect to the A350-1000? The devil you know is better than the (continually-delayed, fault-beset) angel far off on the horizon.
“EXCLUSIVE: A pilot from the Alaska Airlines flight that lost a door panel mid-flight in January is speaking out for the first time about the incident. CBS News’ @krisvancleave has more tonight at 6:30 p.m. ET on the CBS Evening News.
https://x.com/CBSEveningNews/status/1833974169903444220
for the sake of variety
C919’s global push: COMAC explores new offices outside China
“The future of the C919 on an international level will always depend on the commercial relationships that the Chinese government maintains with different countries. If we had to identify potential markets in Latin America where the C919 could operate, two names would immediately come to mind: Bolivia and Venezuela.”
https://aviacionline.com/2024/09/c919s-global-push-comac-explores-new-offices-outside-china/
Yes, I think COMAC will do very well in Latin America and Southeast Asia, just as the thin end of the wedge.
The C919 is a proof-of-concept (industrially) product.
Bloomberg:
China’s Comac Eyes Singapore, Hong Kong for Overseas Offices
Meanwhile, China has just ordered another 80 A320neos:
https://www.bloomberg.com/news/articles/2024-09-12/china-development-bank-leasing-unit-buys-80-airbus-a320neo-jets/
No new MAX orders, despite “early slots” 🙈
Boeing should be kicked out of the Dow
Five years of tough times at Boeing stock $440 to $161 The IAM rally in the alley should consider this before their strike vote.
“And so it’s a legitimate question if the aircraft maker still belongs in the blue-chip index. And it’s a question with only one correct answer: No.”
“If you want bellwether, strong balance sheet companies, they don’t check those boxes any longer,” said Ron Epstein, aerospace analyst for Bank of America. “I don’t think Boeing has to be there.”
https://www.cnn.com/2024/09/11/investing/boeing-dow-jones-stock/index.html
If a volcano is about to explode, can it be stopped?
https://www.seattletimes.com/business/vote-by-boeing-machinists-likely-to-trigger-an-immediate-strike/