Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing 3Q deliveries up despite strike October 8, 2024
- Strike slows Boeing’s march toward improving safety culture October 7, 2024
- Aerospace supply chain still ailing; Sustainable Aviation Fuel isn’t the answer to go green October 4, 2024
- Bjorn’s Corner: New engine development. Part 27. Long developments October 4, 2024
- Longshoreman strike adds to Airbus, Boeing woes October 1, 2024
IAM files Unfair Labor Practice against Boeing in thumping rejection of contract
By Scott Hamilton
Sept. 12, 2024, © Leeham News—Seattle: Members of Boeing’s largest union, the IAM 751, gave the company a thumping in rejecting a contract offer tonight. The contract was rejected by 94.6% of the vote and 96% of the members voted to go on strike at midnight. It was a thumping of unprecedented proportions, said a union member.
Jon Holden, the president of IAM 751. Photo Credit: Leeham News.
Union president Jon Holden said the 751 also filed an Unfair Labor Practices (ULP) complaint with the National Labor Relations Board. He claimed Boeing violated the law in several ways that prohibit company contact directly with members during negotiations.
Holden, who came under some withering criticism from some members for recommending the contract, previously said it was the best that could be achieved at the negotiating table. But in the end, the members had the final say, Holden said tonight.
“While there were many important things that were in this offer, it didn’t make up, it didn’t bridge the gap for 16 years from 2008 and going through two extensions and the threats of job loss, stagnated wages, cost shift on healthcare, and many other issues, especially relocation of thousands of jobs for other programs here in the state,” Holden said at a press conference after announcing the vote.
“Our members spoke loud and clear tonight. All day they were voting across Puget Sound, across Portland, Victorville, California, Edwards Air Force Base, and Moses Lake. I’m proud of our members. I’m proud of them for standing up and fighting for more for each other, for their families, for the community.”
ULP complaint
Holden said the union will go back to the bargaining table as soon as possible. But he added that a ULP complaint was filed today. Boeing, he claimed, engaged in a series of practices prohibited by law.
The IAM 751 filed an Unfair Labor Practices complaint with the National Labor Relations Board tonight. Photo Credit: Leeham News.
“We’ve been documenting them for the last couple of months. And a lot of it was on the shop floor. When managers start to ask specific questions about what someone might want in the agreement, or what if we did this, what if we did that, what is your issue specifically with the agreement, that sort of direct dealing is illegal. There were some other specific issues around unlawful interference. It’s about communication,” he said.
“We have a right to communicate. We have a right to use flyers. And some of that was inhibited. There was unlawful surveillance. That was concerted activity where we might be marching or projecting or talking amongst ourselves on breaks at lunch. Surveilling that is illegal and there was some of that. We’re working through those.”
Issues to be revisited
Ensuring job security is important, Holden said—a reference to guaranteeing that Boeing’s next new airplane is built in the greater Seattle and Portland (OR) regions. “We might have to look at some of that in those areas.
“We definitely have to look at wages. We went through a period of 10 years with stagnated wages and with a mass cost of inflation that impacted our members. And I know that health care costs have been rising. We try to make an effort to lower some of those cost shares in health care. Paid time off is another one,” he said.
Boeing said, “The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members. We remain committed to resetting our relationship with our employees and the union, and we are ready to get back to the table to reach a new agreement.”
Mr. Ortberg decided to play poker — despite having a very weak hand — and he got trounced.
In the next round, he could save BA a lot of money and misery by folding…
—
Always strange how “best and final” offers can somehow get improved — quite an oxymoron.
Bit late to try and act tough now Mr Holden
I’m wondering how long Holden will be in his position once this strike is finally settled. He brought back an offer that was almost unanimously rejected. Not a good look.
Yes, agreed on Mister Holden.
Yes, agreed on that point.
I am getting the impression this was by design, trying to strengthen the hand for the real negotiations. It is almost impossible to get it this wrong if there was a genuine intention to get to a deal which works for everyone.
Don’t make the mistake of underestimatimg how out-of-touch one side is…
“When managers start to ask specific questions about what someone might want in the agreement, or what if we did this, what if we did that, what is your issue specifically with the agreement, that sort of direct dealing is illegal “
I am kinda confused, why would this be illegal, isn’t it not usual banter at work chatting about things over coffee, or is it more organised like in meetings etc
When a boss addresses such questions to a subordinate, it can be seen as (cloaked) intimidation — particulatly in a country in which employees can be fired at will.
I guess I’m looking at it from an European perspective, guess there is a whole different dynamic in the USA.
I find it very interesting but also hugely adversarial between employees and management, like Amazon firing people for trying to set up a union and the like.
Not really we’re all in this together
Compared to the situation in the EU, the USA is very much employer-oriented — employees are generally in a far worse position than in Europe.
One should note that Airbus seems to have no problems with the fact that it has a unionized / collectivized workforce.
From a European perspective, it is unfathomable that these BA workers have gone 16 years without a meaningful adjustment to their remuneration. In the EU, re-negotiations generally occur every 4 years…
+1
In some respects only (such as annual vacation time). But in other ways absolutely not.
Workers in the USA often earn far more than workers in most countries and the affordability of main costs (paying for a home, car etc) is far superior. I don’t know the reliability of the table, but look at https://www.numbeo.com/property-investment/rankings_by_country.jsp. USA price/income is higher only than South Africa, Saudi, and Oman. 3.3. European countries start at 6.6 for Denmark. For the main Airbus producing countries (ie the relevant benchmark for BCA) it is 9.1 – 11.2.
@Woody
Wouldn’t it be a “miracle” that AB not only can survive, it’s gaining market share from BA and reasonably profitable??
How often does “miracle” happen?
P.S. Affordable?? Lol.
Read this
https://x.com/davidhogg111/status/1834241346393284751
There are several reasons why the United States lost its strong commitment to labor unions and the working together spirit that was so typical of the 1930s and 40s. One was the infection of the Teamsters by organized crime in the 1950s. Another was the infection of management with the wartime officer corps who were steeped in a command and control culture, and to a lesser extent, the non-coms who had been drill instructors and their tradition of abusive behavior. Another disease we caught was a culture of greed and privilege that came in with the spoiled and entitled frat boy culture that also infected managerial ranks, and which is profoundly incompetent at almost everything they get involved with.
Slowly, that crap is being excised, but it is taking way too long.
@ Woody
Here you go:
“Why the US Has Been Ranked as One of the Worst Countries for Workers’ Rights”
“…despite its progressiveness and growth, the country has been ranked one of the worst amongst its peers for workers’ rights.
“According to a survey of labor unions, it was found that amongst all the developed nations in the world, the U.S.was the worst when it came to workers’ rights. In a Bloomberg report, it was stated that the U.S. had been placed in the ‘4th category’, which means that there is a systematic violation of rights.”
https://globalpeoplestrategist.com/why-the-us-has-been-ranked-as-one-of-the-worst-countries-for-workers-rights/
—
Workers’ rights comprise more than just salary.
However, if you do wish to compare pay, do so by comparing net pay *after* deduction of medical and education expenses: on that scale, seemingly high US salaries quickly whittle down to a much humbler level.
Or VW about to layoff German plant workers. No adversarial relationship there.
Layoffs happen everywhere, and all the time.
Anyone laid off at VW will get good severance pay, and good unemployment assistance…which certainly isn’t the case when US rank-and-file get dumped.
Meanwhile, those who aren’t laid off will enjoy much better workers’ rights than in the US.
VW unions in Germany do not share your view.
@williams
Remind us when was the last strike at VW in Germany.
Reuters: US Supreme Court Backs Starbucks Over Fired Pro-Union Workers
In US labor law, the union is the bargaining agent for all workers in the bargaining unit. Negotiations are with the union, not individuals. “Direct dealing” is prohibited. That includes managers talking to their subordinates about the terms of the contract or what terms or conditions individuals want in the contract or whether they intend to vote for or against the contract.
Once a manager has asked what an individual’s priorities are, that gives the manager leverage to pressure the worker to vote for a contract. The secret ballot concept is eroded.
Another example – the CEO cannot send a message to everyone telling them to vote for the contract. That is also direct dealing.
👍
The law requires that the company negotiates through the elected union leadership, not the members directly, therefore it’s an unfair labor practice. Circumvention/Direct Dealing Unfair Labor Practice
Going around the Union and negotiating directly with employee/s about changes to a mandatory subject of bargaining.
This applies even if an individual represented employee is willing to negotiate directly with their leader.
Example: Boeing shares proposals with represented employees before sharing them with the Union.
Depends how it is done, but I agree, never have understood why the USA has chosen such a confrontational approach, working against diplomacy (back channels, talking). Seems very counterproductive.
Boeing stock currently down 4.03% in US pre-trading (10:54 CET), putting it at $156.
I suspect it will be sinking a lot lower as analysts issue investor notes in reaction to the strike news.
This strike should be devastating to Boeing, they are already in a bad spot so this is the last thing they need. Will be interesting to see how Boeing handles this. Will they up the bid to get this over with or let it drag out?
Tough start for Ortberg one month into the job…
It won’t be devastating at all to Boeing. They say that all the time but in reality that isn’t true, Boeing’s largest shareholders are Blackrock and Vanguard and both those companies together pretty much own everything and run the show with everything and politics, together they have about 20 trillion dollars in assets under management and tons and tons of cash on hand, it’s pretty much infinite money honestly. This isn’t about wages or the workers, this is very politically motivated, they don’t care about commercial plane delays but they do care about delays with weapons and defense and things of that nature. Boeing is not in debt, they want everyone to think that but they are fine and will be fine as always.
Presumably that was written as sarcasm. I can’t believe that anyone actually believes that kind Cinderella fantasy. Just this past April they sold another $10 billion in bonds to help offset it’s then reported quarterly cash burn rate of $3.9 billion. On top of that, they got two tranches directly from the Fed a couple years ago, on top of all of the bonds they started selling when Debbie Hopkins started the Company m down this path. Before she and those frugal folks from GE came in with the merger, one of Boeing’s problems was finding was to park the cash between major new programs. Just a couple hours ago Brian West was publicly fretting about the burn rate. Debt? What debt? Why am I reminded of a certain scene from Casablanca?
https://www.youtube.com/watch?v=SjbPi00k_ME
Holden said “this is the best we can do at the table” and I suspect the negotiating committee put it to the members specifically in order to get a strike vote, because until that happened, Boeing wasn’t going to improve their offer.
there is no way he was that disconnected with the sentiment of the membership.
Ortberg came into the process too late to restructure the core numbers that were already on the table from the Boeing side without throwing the company under the bus (not to mention, he still has to make his bones with the board)
now that there is a strike vote, he can restructure the negotiating team with his own people and his own numbers, but he needs to do it quick since a 60 day strike would cost the company 4x-6x what the union is asking for over the next 4 years vs the current offer.
Thanks for this comment.
Screw it, just file C11 and restructure.
Why service 60 Billion in debt when you don’t have too.
just fyi
“Many major corporations, including General Motors and United Airlines, have used Chapter 11 bankruptcies as an opportunity to restructure their debts while continuing to do business.”
Sounds about right, they will need to act quick to not drag this out too long.
I am so shocked the same Union that have telegraphed over a year that they wanted to strike………are going on strike.
I’m even more shocked that the airheads in Arlington let it come this far…despite the copious warnings that they got in advance.
This, this, this.. clueless n’ complacent Boeing “leadership”, AFAICS.
Unless there is something else going on; something bigger.
Should have just given them the 40% and pensions back, no for good measure give them another 10% on top of that. Wait didn’t you just flip-flop and state Boeing cannot afford what the workers are asking for in another post?
No — I asked where Boeing will get the money to cover the extra costs…which is not the same as saying they can’t afford those costs.
I specifically mentioned ending the practice of selling at a loss, for example.
I also mentioned a 95% pay decrease for board members, as another example.
“airheads in Arlington” is an partial redundancy-s/b Airheads in Seattle and Arlington and Board of Directors ..
Union president Jon Holdenhad had his chance to fight for the Members, in the past months and he failed them, the leadership took the stance saying it was the best offer, but time and solidarity will prove that is not the case..
In my opinion, the leadership did not want the strike because they stand to lose 3 million dollars a month in union dues..
Thanks for this continuing reporting on the IAM strike action.
Both sides say they are ready to get back to the negotiation table. But when will they meet again to restart??
@Pedro
That is a very good question. We have heard comments about how much time the union has before they get desperate (~60 days and right before the holidays). But how desperate is Boeing?
How long can they sustain the cash burn before they have to go back for more financing? And will that be under a junk rating? The October earnings release will be very informative if it gets that far. If the cash burn was anything like close to Q2 they will be down to $5B after Q3…not factoring in strike costs.
I wonder if it’s possible that the two sides meet over the weekend and starts to hammer out “the” deal.
From D Gates:
“In notably conciliatory public remarks Friday morning, Boeing CFO Brian West said senior leadership wants “to get back to the table and to hammer out a deal” with the Machinists union
He said new CEO Kelly Ortberg is personally engaged in the effort”
https://t.co/kTihwilS6M
https://x.com/dominicgates/status/1834652296455811314
@Pedro
My first real paint point I am calling for Boeing is their Q3 earnings call somewhere at the end of next month. They kind of got away with a line of BS about improvements in the Q2 call. Q3 is the point where a lot of credit downgrades start happening if there is no positive momentum. Boeing has 6 weeks to make something happen. Just my opinion
Q3 will be another bummer:
– Deliveries are still meager;
– Line rates are still stuck at very low levels;
– Orders have slowed to a trickle, and cancellations / deletions are eroding the order book;
– There are bound to be new writeoffs for the latest screw-ups with the 777X, KC-46A and Starliner…and maybe also the MAX (wiring debacle);
– Ongoing costs associated with a whole array of legal proceedings;
…and strike costs on top of all that!
Got the answer.
“NEWS: The Federal Mediation and Conciliation Service says Boeing and @iam751 “will resume meetings early next week” as they hammer out a second contract offer for the machinists.
https://x.com/jonostrower/status/1834737708394012984
Well, here we are…. a strike. Now Boeing has to decide if they want to endure the full (estimated) $3-3.5b 60-day strike, or if they want to come back to the table with another offer. Can they actually afford to lose that much money over a 60-day period, or potentially even longer if they cannot reach a settlement? This will wreak havoc on BA’s ability to deliver any more frames this year, and they will be burning through cash.
IMO, if I were a member of the Boeing exec. team negotiating with the union, I am spending the next couple of days trying to figure out how to sweeten the offer. Yes, give them one board seat. Yes, give them closer to the 40% inc. they wanted, but spread it out over 5 years. (say 35% / +7%/yr). And, be a bit more generous with the ‘ratification’ bonus… say $5k. Boeing has to do what it can to put a quick end to this strike, as the revenue hit from the strike will be much greater than the cost of these increases.
With 96% strike vote, there is no quick end to it. Need to look down the road for SPEEA contracts, Wichita IAM contracts….everyone will want 40% pay raise.
Need to wait 4 weeks to get back to serious negotiations, let the IAM membership write that first healthcare check in the next couple weeks and miss a few direct deposit paychecks….25% pay increase may look at a little better after the rally in alley enthusiasm wears off
To quote Rahm Emanuel ,
“You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.”
Restructure Boeing, or merge. Coming out with significantly higher costs and the same debt burden does you no good.
Thank you for quoting Rahm Emanuel. It’s always good to get a notion of where other commenters are coming from.
How likely is BA be downgraded to junk??
Boeing Risks Being Cut to Junk as Strike Hurts Production
‘Moody’s said in a statement on Friday that it’s reviewing the ratings for a possible downgrade and that it “will assess the strike’s duration and impact on cash flow and the potential equity capital raising Boeing may undertake to bolster its liquidity.” […]
The company has $4 billion of debt coming due in 2025 and also $8 billion coming due in 2026, according to Moody’s.’
https://www.bnnbloomberg.ca/investing/2024/09/13/boeing-risks-being-cut-to-junk-as-strike-hurts-production/
Don’t worry: according to some commenters here, BA is sitting on a fortune in unfilled orders…
🙈
Yep BA “will lose money on each unit – but make it up by volume ” as taught by Stonecipher and Welchians assisted by McKinsey,
Think about the customers’ deposit, free money 💰!!
The show must go on …
“Moody’s warned of a downgrade if Boeing issues debt alongside any equity raised to meet its liquidity requirements, including the money it needs to retire about $12bn of debt maturities from now to the end of 2026.”
https://www.aljazeera.com/economy/2024/9/13/ratings-agencies-warn-of-downgrade-if-boeing-strike-prolonged
Marketwatch:
“Moody’s said a prolonged strike would disrupt the recovery of the commercial airplanes business, which is still in the early stages.
“We believe production of the 737 MAX narrow-body increased to near 30 a month for July and August. This compares to the U.S. Federal Aviation Administration’s (FAA) 737 production cap of 38 a month (cap),” said the statement. […]
Investors were again taking a defensive position by selling certain longer-dated notes and buying more recently issued bonds that will pay more if the aerospace company’s credit is downgraded.
GimmeCredit analyst Carol Levenson wrote earlier this week that Boeing is “bleeding cash, clinging to investment grade ratings by a fingernail, and struggling to increase production after [a Federal Aviation Administration] mandated slowdown to improve its quality processes (after the exploding door plug embarrassment).”
https://www.morningstar.com/news/marketwatch/20240913319/boeings-credit-rating-risks-being-cut-to-junk-after-moodys-frets-about-strike
“We believe production of the 737 MAX narrow-body increased to near 30 a month for July and August.”
The line rate for the MAX in August appears to have been just 19:
32 (delivered) minus 9 (China; parking lot) minus 4 (Air India Express; parking lot).
I wonder where Moody’s got their #s.
@ Pedro
Maybe Moodys think every delivery comes straight from the line? 🙈
Interesting
The NBA is getting a fleet of VIP Airbus A321neo, operated by Delta.
A321 for the extra legroom for the NBA players! 😀
I think this is a fair observation and assessment.
I’m going to split the thread into a few posts. It’s a looong thread.
“A couple of early observations on the first day of the @IAM751 strike at @Boeing. First, this 2024 contract (which had the leadership’s blessing) failed by a greater margin compared to the last time the machinists went on strike. In 2008, 87% voted to strike. In 2024 it was 96%.”
https://x.com/jonostrower/status/1834734468189376773
“Second, there was a major difference in the mood of then union members at the hall and on the picket lines just after midnight last night. I went back and listened to my audio from the 2008 contract vote. There was intense, white hot anger from the assembled crowd back then.
“Last night, there was anger, but it was far more subdued by comparison — and also focused. It’s not that the union is any less militant in its approach, but I think the context for 2024 is inherently different than 2008.
“Boeing’s posturing in 2008 was overtly negative and adversarial & in the thick of an outsourcing strategy designed to reduce union’s influence. It was a disaster. 16 years later, its desire then to be a “large scale systems integrator” deeply wounded its ability to do just that.
“In 2024, there was widespread dissatisfaction with the contract offer, which members contend doesn’t keep up with inflation and make up for two decades of takeaways and moving (and threatening to move) work out of Puget Sound.
“Boeing’s strategy is significantly different in 2024. It appears there is a genuine desire for reset at the highest levels of the company. But resetting is hard when 33,000 machinists have more time at the company (and all the baggage) than its new CEO.
“Boeing CEOs for the last 23 yrs have been out-of-towners. New CEO Kelly Ortberg has been repeatedly involved — no BBJ ride required. He went to negotiations Sat. to add the 797 offer to the contract. He just bought a house in Seattle. If it feels unfamiliar, it’s because it is.
“Boeing actively bargained in bad faith in 2008, allowing the strike to stretch 57 days and give it cover for blaming another delay developing the 787 on the union. The airplane was far behind schedule and the strike & global financial crisis obscured its strategic mismanagement.
“I don’t know how long this strike lasts, but Boeing needs the machinists back at work and they need the short and long-term cultural stability that will come with an improved economic offer and giving its next new airplane, whenever it arrives, a home in Puget Sound.
Love how they’re still talking about this mythical ‘797’.
It’s not an accident. Muddying the waters is a a useful
technique for some.
“Workers in the USA often earn far more than workers in most countries and the affordability of main costs (paying for a home, car etc) is far superior.”
Boeing ex-CEO Dave received a $45 m as a parting gift for his retirement.
Airbus CEO – poor Guillaume Faury – total* compensation for 2023 was less than $6 million.
Damn those French must be too poor to enjoy their lives …