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
Is Boeing’s BAFO really it? IAM rejects it and says no vote (Update) (2)
Update 2: Here is the red-lined union contract proposal from Boeing: Redlined-CBA-IAM751W24-Sept-23-2024 (1)
By Scott Hamilton
Sept. 23, 2024, © Leeham News: Boeing’s Best and Final Offer (BAFO) today to its striking IAM 751 union membership for a new contract is a risky gamble.
The offer bypassed the local’s negotiating team and appealed directly to the membership. 751 leadership already filed a complaint with the National Labor Relations Board for alleged violations of collective bargaining laws for the same reason during the original contract negotiations.
Boeing risks a new complaint over its latest move, which almost certainly angered Jon Holden, president of 751, and the negotiating team. No comment has been forthcoming from Holden or 751, but the president of the “parent” IAM issued to following statement, ABC TV News reported yesterday:
“Employees knew Boeing executives could do better, and this shows the workers were right all along. The proposal will be analyzed to see if it’s up to the task of helping workers gain adequate ground on prior sacrifices,” said Bill Bryant, president of IAM International.
The absence of a comment from 751 doesn’t mean others aren’t. Two retired Boeing IAM members told LNA the BAFO is acceptable and said union members should approve it. However, social media commentary takes a decidedly different view.
Update: The IAM 751 just posted a response to its Twitter (X) account, here. It’s a scathing reply. In part, the union leadership said, “THIS IS A NON-NEGOTIATED OFFER from Boeing. Your Negotiating Committee did not have any discussion or input on this offer. We have said all along that the Union would be available for direct talks with Boeing or, at a minimum, expected to continue mediated discussions when the company was ready. These direct dealing tactics are a huge mistake, damage the negotiation process, and attempt to go around and bypass your Union negotiating committee.” (Emphasis is the union’s.)
There will be no vote Friday, the union says.
One post on Reddit mocks Boeing’s “Best and Final Bingo” offer. There are claims of “astroturfing,” ie posts that purport to be from IAM members but which are believed to be ghosts for Boeing. There’s no proof, but one former IAM member said that during the contentious 2013/2014 vote for concessions in exchange for the 777X assembly in Everett astroturfing was traced to Boeing.
Other posts make it clear that there is resentment over Boeing’s releasing the BAFO to the media before the members received it. And generally, there remains a belief that Boeing can do more.
Staging a vote is questionable
Boeing made its BAFO contingent upon an approving union vote by midnight Friday. It’s not even clear that Holden must stage a vote since the BAFO didn’t come through the negotiating committee. If there is a vote, the posts on Reddit suggest that approval is far from certain. Union comments on today’s earlier post also are overwhelmingly negative.
On the striking picket lines, reaction was mixed, according to a local news outlet. The Seattle Times’ picket line reporting doesn’t bode well for Boeing.
I asked a neighbor who is on strike if the union might reduce its demands if the execs would simply refrain from driving (sometimes literally) the company into the ground. He said “Nah, we’ve put up with far too much for far too long”. It looks like the exec cash cow may be butchered.
Welch and McDonnel virus still infecting- a bit of history
http://caselaw.findlaw.com/us-10th-circuit/1111284.html
James R Milsap,et.al v McDonnell Douglas Corp. Case No 94-C-633-H Filed Sept 5, 2001 U.S District Court, Northern District of Oklahoma..
MILLSAP v. McDONNELL DOUGLAS CORPORATION
The facts are undisputed. Defendant manufactured and assembled military aircraft at a plant in Tulsa, Oklahoma. Defendant’s employees at the plant participated in pension and/or health care plans qualified under ERISA. Defendant announced the closing of the Tulsa plant in December 1993. Defendant subsequently laid off all employees at the Tulsa plant. The Plaintiff class consists of 1,074 of those employees. Plaintiffs filed this action in 1994 alleging Defendant violated § 510 of ERISA. Section 510 provides in relevant part: “It shall be unlawful for any person to discharge ․ or discriminate against a participant or beneficiary ․ for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan [or Title I of ERISA.]” 29 U.S.C. § 1140. According to the complaint, Defendant closed the Tulsa plant to prevent Plaintiffs from attaining eligibility for benefits under their pension and health care plans. Plaintiffs requested damages, an order requiring Defendant to make restitution to their benefit plans, and any other equitable or remedial relief.1
—-
September 6, 2001
Judge Hands Boeing Defeat in Lawsuit
Brought Over Loss of Retiree Benefits
By J. LYNN LUNSFORD and ELLEN SCHULTZ Staff Reporters of THE WALL STREET JOURNAL
A U.S. District Court Judge in Tulsa, Okla.,
handed Boeing Co. a surprising defeat
Wednesday in a class-action lawsuit filed in
1994 by more than 1,000 older McDonnell
Douglas Corp. workers.
The workers alleged that the company closed
their plant in order to avoid paying pension,
health and retiree medical benefits.
Judge Sven Erik Holmes issued a 90-page
opinion that found among other things, the
company “engaged in a course of obstruction,
inconsistent representations and outright
falsehoods” during the course of the lawsuit to
keep the truth from coming out about the 1993
closure of a McDonnell Douglas plant in Tulsa.
====
So whats new ?
McDonnell Douglas / IAM 720-J used to have a 30 and out (retire after 30 years full retirement no matter your age) they closed their Torrance facility before the majority of the employees hit their 30 years!
If I am not mistaken, the IAM negotiators are under no obligation to bring this proposal to a vote. It is at the discretion of IAM negotiators.
This will be an incredibly awkward negotiation going forward if this offer is not accepted. How do you go back to negotationing with someone you just bypassed (plus federal mediators) after this move?
I would be interested to know if this direct offer was a power play by Ortberg.
Good questions..
Hey Mr George, how much you paying the new guy?20 bucks, it’s too much.He no good negotiator
Oh this is interesting
Is this really a BAFO? Most commenters here see it more like a WAFO. Maybe it’s something between a BAFO and a WAFO….. a MAFO?
Honestly, I think the strike is as much about venting anger as about negotiating improved pay and benefits. It’s like the scene in the old movie Network where everyone opens their windows and screams: “I’m mad as h— and I’m not going to take it anymore.’
Not unexpected…………Was anyone paying attention to what the rank and file were stating months ago. They telegraphed this. They want to go on strike, they want to send a message……………….Its was not a secrete.
This is going to be long, and protracted. And after hearing the Long Shoreman Union leader ( he is funny and entertaining to watch) not play nice with the White House. I don’t expect Harris to get anywhere near this.
With all that stated, if there is anything Eastern Airlines has shown us, Unions suck at financial math.
Foolish move indeed by taking negotiations out of the equation. How s playing cards by yourself working out for ya?? We ain’t falling for the tough talk no more. Betting is more fun when someone loses
“How s playing cards by yourself working out for ya??”
harumpf!
you decide who wins 🙂
If the Unions suck at financial math, what does that say about mgmt, who drove the company off the cliff and into a $58 billion consolidated debt hole, in the first place?
They’re good at it?
Don’t forget, Frank: the order book is worth an absolute fortune, right? 😂
To your point: just consider the “Wild West” show that Brian put on with his wildly-divergent cashflow projections before, during and after the most recent bond issuance…only to subsequently admit that he had “no idea” vis-à-vis the subject.
funny that the financial hole they are in is almost exactly the amount they have spent on “returning equity to the shareholder”, i.e. pumping the stock price on the CSuite share issues through stock buybacks.
Looking at the return on stock (depending when one got out), yeah, there were.
Of course, Boeing is now paying for such short-sightedness. Those employees who owned stock did well too.
The United ESOP turned out so well.
The Union has lawyers that will read the contract and highlight the importance of each category you ever hear the term I am not signing anything without my lawyer Boeing is trying to put as fast one with no legal contact.
I would vote yes if we get the opportunity to vote by 9/27/2024
It’s not a pension but the 401K contributions are significant.
30% GWI plus they doubled singing bonus & returned the AMPP bonus
This offer is better than the previous and I believe would be a good compromise
for both the company and IAM employees. By reading the unions response we will be lucky to even get a vote. Boeing Portland 23 years of service.
It is little different they just moved money around and offered a bigger signing bonus. I did the math and in order to make up for our stalled wages they would need a 21.5% GWI in the first year. In the last 8 years my buying power has gone down the toilet. I will wait until they make up for that as well as absorb more of my health care costs.
Health care costs…. Can anyone comment on Executive vs Rank-and-File health plans? If workers aren’t getting the same relief from health care costs (and worries!) as the execs are it seems the R&F is being screwed.
If we were able to bargain for new contracts for just 12 out of the 16 years we would have 36% on the low end. They already took the pension. Don’t let them take the pay as well. No one wants a ratification bonus btw.
It looks as if the elusive Mr. Ortberg isn’t making much attempt at all to “reset relations” with the union — slapping them in the face by bypassing them sounds more like a Dave tactic.
Perhaps the “special adviser” is pulling the strings from behind a silk curtain?
A sure way to run the company even further into the ground…
Yah, Hidden Hand of Mister Calhoun?
Boeing management needs the strike.
Perfect “PR workable” cop out for no output.
Or something else in the works.
+1
As reegards the Friday deadline attached to the so-called BAFO from BA, any ideas/theories as to what its significance is?
Just a random, near-term date, chosen to put pressure on the shopfloor?
Or perhaps something to do with a “go / no-go” decision point with regard to floating more equity (or — foolhardily — taking on more debt)?
On the equity issue, one wonders how Ms. Pope is getting along with the big bankers on Wall Street. Yesterday’s LNA article referred to a potential issuance of 190 million new shares; with 616 million existing shares, that wouild represent a dilution of 23.6%. Not sure that there’ll be much underwriting appetite on WS when there’s that much downside risk involved…
The board, of course, won’t have to worry about the erosive effect of dilution upon their share packages — they can just award themselves extra, compensatory shares when the dust settles 👍
Did the union negotiators not recommend the previous offer to their members? Why would they reject an improved offer? Seems more like a bit of etiquette has put some peoples noses out of joint.
If it’s not accepted then continuing the strike will no doubt cause further harm to the Company when it is financially weak.
Feels to me like Ortberg is in a win-win (or rather no way to lose) with this BAFO. The workers must know Ch.11 is a very real, imminent possibility. And I get he impression that a sizeable % feel the offer is decent. So…
If the union leadership backtracks and the members then accept the offer Ortberg reduce the union leadership power, many of the workers are happy, Ortberg is seen to be clearly in charge, not trying to squeeze inputs dry, and gets things done reasonably quickly.
If the union leadership doesn’t backtrack but members themselves accept the offer (is this possible?), even better for Ortberg.
If the offer isn’t accepted, Ch.11, have a good old proper clearout and a much more wide ranging reset.
No way to lose for Ortberg?
Sure there is — I can see the editorials already:
“Just 6 weeks on the job and new CEO pushes US Blue Chip over the cliff after deciding to play Russian Roulette with raging workforce”
I can’t see an emotive headline like that myself. Maybe the sentiment. But surely Ortberg’s job is to restore Boeing to a strongly competitive, sustainably profitable condition. And, if the price to pay is he bad headlines short term (or even career defining), so be it.
If the C suite have misjudged what would make a not unreasonable BAFO such that relations between C and shopfloor are soured for years but Boeing does return to being strongly competitive and sustainably profitable because of it then I assume his contract will state he has succeeded.
I don’t know what a thoroughly knowledgeable, independent would determine to be the range of reasonable offers, but if this BAFO is in that range and the union declines it how would this not be the union cutting off the noses of those they are supposed to represent in order to spite their faces? I get the power struggles/plays, I’m aware of the (to my mind) potentially counterproductive laws, I get the way many shopfloor will feel after prior events. But if an offer would independently be considered reasonable and it is declined despite knowing Boeing’s health, then….
I appreciate Scott for being the first to point out about the possible and outstanding ULP context of this offer. This is my take on it. There have been comments of other good and minor redlines being taken away. Many news outlets didn’t. I’ll be subscribing when my financial situation improves.
While I have always known our higher executives to do what I would consider “dumb news” I realized last night, I am truly embarrassed to work for a company, when we have real big technical and financial challenges to solve, are still spending their time playing financial games, cloaked in lack of transparency and trying to pit employee against employee, not just once, but double and tripling down on it. I’ll still be here, trying to keep the wheels on the bus, at least since I boomeranged back, got relatively decent pay up to market, and love what I do. However, I know a lot of our earlier career engineers (even in SPEEA) are considering other options since they don’t see the company righting itself anytime soon and will likely face layoffs as the company continues down this dangerous path of bankruptcy or severe stock dilution.
Possible outcomes:
IAM refuses to schedule a vote by Friday. Strike continues and Boeing eventually makes another offer which does get a vote
IAM schedules a vote by Friday.
Unorthodox tactics sometimes work, but unless there’s a clear path to the desired outcome such moves usually backfire, sometimes spectacularly.
It strikes me that Boeing management has completely lost the plot about the risks of out of sequence work, and has come to believe winging it in every way is, somehow, a core competency.
Does anybody realize that Boeing created a loophole for themselves. If they don’t have a new plane program set up in the next 4 years, well they can take it where ever they want. That is not job security in my mind.
Yep. Kind of hard to guarantee something not launched yet.
By definition, a guarantee refers to something that hasn’t happened yet.
Other companies seem to manage it just fine.
nobody in their right mind put even $1 value to that “commitment” other than it being a clear commitment to _not_ launch a new program any time in the next 4 years.
Absolutely. The guarantee is meaningless. A Boeing CEO (Muillenberg? Calhoun? There have been so many…) already stated that no new plane development will even start this decade. They can put in 10 years and it still wouldn’t be worth the paper.
““We contacted the company to demand they engage in either direct talks or a mediated discussion. The company has refused to meet for further discussion; therefore, we will not be voting on the 27th,” the union said. ”
https://www.aerotime.aero/articles/boeing-machinists-reject-boeing-final-offer
No more PR floor walks or handshakes from Mr. Ortberg, it seems: he prefers to stay closeted in his ivory tower — not deigning to descend for a direct parley with the “rabble” on the steps below.
# Nothing Has Changed
On the subject of ivory towers: does anyone know the actual size of the “commensurate pay cut” that Ortberg announced for management during the furloughs?
Is it even 5% ?
AIRBUS IS #1 BECAUSE OF STRONG UNIONS! In the U.S. “See something say something” equals retaliation!
I thought it was the decades of Government subsidies………..Go figure.
You mean the $90B in state/federal loans, grants and tax breaks given to Boeing since 1991?
Those subsidies?
Go figure.
I was talking about Airbus’s subsidies since 1970. But you don’t have that number, do you? Those inconvenient facts.
I guess it’s a moot point, the Unions are the reason Airbus is strong.
Well, you’re the one who raised the subject of Airbus subsidies…so you should be the one to supply the Airbus numbers, don’t you think?
Repeating jaded — and inaccurate — anecdotes about Europe won’t help Boeing…
Inconvenient facts.
start up investment with some staying power is an enabler.
You still need a sane environment to create good products.
I wrote this before: all the hindrances Airbus was seen to be saddled with are rather long term productive enabler.
Having a world-class and motivated salesman named John Leahy, helped too. I wished he worked for Boeing, but it’s a moot point, management probably would not have listened to him as Airbus did.
Airbus will be on top of the aviation market for decades, and he is half the reason why, he deserves a statue.
What would Leahy have sold for Boeing?
737 Jurassics?
Without Leahy Boeing sold impressive numbers of 787
… with ghastly negative impact on their piggy bank 🙂
A perfect product to work from was essential for Leahy’s
success. Logic AND not OR!
How about this?A modest raise and all the profits for the next 10 years.That would focus everyone on the reality of the situation
profit numbers are too easy to manipulate. this is why large, profitable companies never pay taxes, because they hide their profits in legal fictions.
straight % of revenue is a better model.
Can you give us some (backed-up) examples of companies that “never pay taxes”…with emphasis on “never”?
hyperbole is hyperbole. @scott, I am about to go off topic here a bit, so if this is too much, please delete and have mercy on me.
“never pay the amount of taxes that is commensurate with their actual profits” is a better way to phrase it.
offshoring, double irish, licensing fees for IP from “foreign” subsidiaries for IP developed in the US, then “sold” to the foreign subsidiary for $1 and considerations (Microsoft in particular had this one down), asset writedowns, depreciation.
answer me this: do you get to take a capital investment income deduction when you buy a new car, then get another tax break every year for 5 years as you depreciate it, then take another capital investment deduction when you replace it? no? companies do. how is a car not a capital investment in the business of _you_?
humans pay a revenue tax (with certain limited deductions), companies pay a profit tax (with a whole lot more deductions).
explain to me how that is fair if “companies are people” as defined by the supreme court when they were granted political speech and greater rights to bribe elected officials through unlimited campaign donations vs humans who are limited to a small fixed amount per candidate (unless they form a corporation in the form of a PAC and pump $100M into it)
Good to see that you softened/withdrew your original, inaccurate assertion.
Depending on what jurisdiction you’re in, private individuals get to deduct a whole load of items from their gross income, before having to pay taxes. These include pension contributions, (chronic) healthcare costs, (higher) education costs, (a portion of) debt servicing costs, gifts to registered charities, certain types of home improvement costs (e.g. better insulation), etc. That’s a whole load of deductions!
Regarding corporations — they pay a lot more than just profit tax. Once again, depending on the jurisdiction, there is also capital gains tax, dividend tax, investment tax and environmental tax. Bear in mind that any revenue that is not taxed is stored in the company’s fiscal reserves: if it’s subsequently paid out to a company officer, shareholder, etc., it gets taxed.
Private individuals can be just as creative when it comes to tax avoidance, e.g. by parking funds in a low-tax jurisdiction, setting up questionable endowments, entering into paper relationships, etc.
No doubt, large corporations are creative when it comes to avoiding a portion of their taxes — but so are private individuals. And, after their creative tricks, most corporations still pay huge amounts in taxes…in addition to creating employment, stimulating innovation, etc. A discussion of what is “fair” as regards taxation is a matter for lawmakers and broad societal debate — I’ve never seen an objective definition of the concept.
@abalone
sure, but generally only very wealthy people have the means to take advantage of the tax sheltering methods you describe.
your average non-homeowner gets their health insurance (if they get it) and 401k (if they have one) deductions and that is about it and then pay taxes on net revenue. and they get taxed on anything they withdraw from the 401k when they retire, so that is just a deferment, not a deduction.
compare that to businesses that are only taxed on profit. that would mean the person could deduct rent, utilities, car, insurance, furniture, food, non-recreational gas (commuting and shopping for life essentials) and only pay taxes on what was left after that (“profit”).
pretending the tax system is not extraordinarily biased in favor of corporations and the wealthy is absurd.
The majority of Boeing employees are non-represented. They would sell their first born for the offer Boeing is making. They took away our pension 15 years ago, we have averaged under 3% raises forever.
IAM is greedy and hurting themselves. I worked on the 737 final assembly line as an IE. The laziness and pathetic work ethic of IAM employees was laughable. Every morning there would be snoring in the bathroom stalls on the line, and booze bottles littered the bathroom and parking lots. Rework was HUGE. I have ZERO respect for IAM workers. Hell, you could train a bum off the street in a year to replace them, easily. Take your contract and be happy with it, ungrateful high-school drop-outs…….
It’s not just about money, it’s also about accountability at the top. This is the type of system Boeing needs to make sure the new top people keep themselves and their employees of of trouble.
https://www.industryweek.com/resources/industryweek-best-plants-awards/article/55139579/2024-industryweek-best-plants-two-way-accountability-drives-excellence-at-hoffer-plastics