Leeham News and Analysis
There's more to real news than a news release.
There's more to real news than a news release.
Leeham News and Analysis
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
- Boeing First Quarter Results: Tariffs, Return flights, $10.55bn asset sale April 23, 2025
- RTX Q1 2025 Earnings: GTF Talk Takes A Back Seat To Tariffs April 22, 2025
- Tariffs Tumult Takes Over GE Aerospace Q1 2025 Earnings Call April 22, 2025
Boeing, IAM reach contract agreement; vote on Wednesday
Oct. 19, 2024, © Leeham News: Boeing and its striking union, the IAM 751, announced a new agreement this morning on an improved contract offer.
The IAM summarized the new offer here. The highlights:
- Wages: A 35% general wage increase spread over 4 years (12% in Year 1, 8% in Year 2, 8% in Year 3, and 7% in Year 4).
- Incentive Pay: The AMPP incentive plan is reinstated, with a guaranteed minimum annual payout of 4%. Including 2024 payout in February 2025.
- Retirement: Company 401(k) match increased to 100% of the first 8% contributed, alongside a 4% automatic company contribution. Additionally, there is a one-time $5,000 contribution to each unit member’s Boeing 401(k).
- Pension: The BCERP multiplier benefit increases to $105 for vested employees.
- Ratification Bonus: A one-time bonus of $7,000.
- Sick Time Call-Out: Reverts to the existing contract language’ call in before shift language removed from contract.
Other provisions of the contract offer rejected on Sept. 12 are carried forward into this offer.
A membership vote is scheduled for Wednesday. This is also the day Boeing details its previously announced 3Q2024 financial results. The IAM leadership isn’t making a recommendation on whether to accept or reject this new offer. No new strike vote is needed, because the members are already on strike—now into the fifth week.
So, as expected, the previous “best and final” offer was neither “best” nor “final” 🤭
This sounds like an attractive package.
I think the union members should accept it.
Defined-benefit pensions are fossils from the past — the 401(k)-related parts of this deal sound reasonable to me.
With all due respect to the striking workers, I think it would be foolhardy to try to hold out for more.
“Defined-benefit pensions are fossils from the past”
I see that statement quite a bit. Nobody seems to make any sort of sound argument as to why the are not a good thing.
+1
@Steve
I would point out in a bankruptcy your pension is not 100% guaranteed. A 401k does not have that baggage.
Sure Ask anyone who observed their 401k balance in 2008, or 2020.
Everybody with any sense knows what’s about to happen to the markets, and many of Boeing’s 401k options are some of the riskiest and carry the highest fees.
And soon 401k’s and IRA’s may join pensions on the heap of “a thing of the past”.
https://mishtalk.com/economics/will-a-money-hungry-government-take-away-your-ira-and-401k/
Ahhh the old trick … government will take away your …… guns , pensions, children , take your pick
Also, the 401K travels with you wherever you go. And you have much greater control of how it is invested.
That is true and I did pretty good with mine, but you could also change the law and have a defined plan travel with you.
One key is to get a good investment advisor. Dump any operation that talks about generating wealth.
I will not say they are the only ones but the best one I have been linked to is Edwards Jones.
“I would point out in a bankruptcy your pension is not 100% guaranteed.”
All depends on how large is the gap in unfunded/underfunded liabilities in the pension plan(s).
A fully funded pension plan, using modest/conservative financial assumptions/modeling, shouldn’t leave its members worse in a bankruptcy.
People live a lot longer past retirement age.
The other factor is hardly anyone stays with one company their whole working life or most of the last 20 plus years
Workers need portable schemes that move with them – that does away with ‘man in the middle’ company which invests the money and pays out.
There is NO good argument for defined benefit scheme anymore as its a gold mine for the few that start at the bottom and rise to a senior management level after 30-40 yrs with the same business or government agency
Not Boeing employees who work on the shop floor. The chemical hazards and job stress take their toll.
Portability has always been the red herring,
The argument for a pension is made by the coming crisis in retirement, when young folks projecting working until death.
I don’t believe the hazards on labor work are a Boeing aspect only.
All my jobs had some degree of chemicals and occasionally pretty bad (better as time went by and MSDS and safety programs kicked in). I had hands on experience with Stoddard’s Solvent. Respiration and full elbow gloves now for that.
While I did not work labor my entire working life, a big part of it was and a significant physical aspect till the end, just not as high a percentage. Hoists and lifts and assists became my friends.
Your body gets worn regardless. But I was not an office type so it goes with that choice or maybe bent.
The discipline of wearing all MSDS safety gear is normally poor, the US shops enforces safety glasses pretty good but the rest has room for improvement. Jet engines got away with steel and Cadmium long time ago, still widely used on aircraft. Same with Cr6+ in different alodines and its StCr relative in primers. We still have 61 cancerogenic chemicals in our database and try to minimize by careful chemical equivalence work.
Steve R.
The problem with defined benefits plans is the gross underestimation of the life expectancy of the recipients. While the US life expectancy actually declined slightly in the past few years, this drop was because of the huge numbers of young (relatively) people dying from addiction and suicides. The pensioners pool now lives into their late 80s and beyond and this turns the actuarials upside down
Another recent turn of events is the number of pensioners that take lump sum payouts which really reduces the funfs investment portfolio. Intrest rates went up, bond yeilds sank and people grabbed the cash before the funds reset to account for reduced future earnings. A lot of Spees members exited last year to beat the jan 1 rate reset which would have reduced lump sum payouts dramatically. Some reported 200 and 300 thousand dollar differences in the payout post Jan 1 this year…..
Thats life expectancy for those *born* this year.
Any company has to pay for people *retiring* this year, their remaining life expectancy is many many years higher again.
In US it is at 65 age 17 more years for men and nearly 20 more years for women, thats an *average* too. Many could live into their 90s and thats the money blowout.
Boeing shop floor retirees are in their own group, with chemical and toxic metal exposures, long hours and high stress.
Boeing is the only major corporation ever to be sustainably accused publicly with the attempted murder of it’s own employees.
https://law.justia.com/cases/washington/supreme-court/1995/62530-1-1.html
“CONCLUSION
In response to the questions of the United States Court of Appeals for the Ninth Circuit, we hold the plaintiffs here have demonstrated facts sufficient to justify a jury in finding a deliberate intention by Boeing to injure them. Further, to the extent they allege that such deliberate intention to injure was outrageous conduct, they have stated an additional claim for the tort of outrage that is sufficient to reach the trier of fact.”
Boeing continues to be a dangerous place longevity wise.
https://www.google.com/search?q=boeing+toxic++formaldehyde&client=firefox-b-1-d&sca_esv=0a3e250173e3dd9d&ei=GBEUZ_3DBZ2k0PEP6qjNqAI&ved=0ahUKEwj9r9eOn5uJAxUdEjQIHWpUEyUQ4dUDCBA&oq=boeing+toxic++formaldehyde&gs_lp=Egxnd3Mtd2l6LXNlcnAiGmJvZWluZyB0b3hpYyAgZm9ybWFsZGVoeWRlMggQABiiBBiJBTIIEAAYgAQYogQyCBAAGIAEGKIEMggQABiABBiiBEjyNlCbDFiCHnABeACQAQCYAU6gAecDqgEBN7gBDMgBAPgBAZgCCKAChQTCAg4QABiABBiwAxiGAxiKBcICCxAAGIAEGLADGKIEwgILEAAYsAMYogQYiQXCAggQIRigARjDBMICChAhGKABGMMEGAqYAwCIBgGQBgiSBwE4oAfpEg&sclient=gws-wiz-serp
As to buyouts, Boeing offers them. Nevertheless the pension has been funded between 90% and 120% for years. It would still likely be over funded if Boeing had not directed the plan administrator to buy BA stock at all time highs to drive it even higher.
And since buyouts for IAM members are a provision of this offer, I don’t see what you are on about.
So this case was about establishing a workmans comp work around when an employer either deliberately tells you to use a piece of equipment without its protective apprati, use a toxic chemical with no PPG or was negligent in the same. This piece of legislation known as the “deliberate injury exception” has been written out of the law since ..
“Nobody seems to make any sort of sound argument as to why the are not a good thing.”
They’re nominally “good” for the person receiving the pension — assuming he/she isn’t inclined to switch between multiple employers.
However, they’re increasingly unaffordable for the entity paying the pension.
The Netherlands is regarded as having the best pension system in the world, and even it is switching away from defined benefit pensions.
Boeing was hardly impoverished when the pension for IAM members was suspended. Since the pension never had a COLA provision, all investment income and interest flowed back to the pension plan, which Boeing carried on it’s balance sheet as an asset.
you get in life what you negotiate not what you deserve .. every CEO since Phil Condit have created no value and have had a last negative impact – “value deminishers” VS the IAM Value creators .. yet they all walked with insane compensation packages .. the argument against pensions are in effect arguments for the transfer of wealth from the value creators to the blood suckers on wall street .. This strike has eliminated all doubt that Renton will eventually be shut down when 737 runs its course. I say, throw down the gauntlet ..
I think it is true that no company wants to have the long term financial obligations of a defined benefit plan, especially since there is some uncertainty as to exactly how much the benefits will cost in the end.
In general, I think economists like the idea of labor mobility, or, that workers feel free to jump from one company or industry to another.
In the case of Boeing one could make an argument in favor of pensions because, as Calhoun recently testified in the Senate, “the quality problems were mostly due to an untrained work force”. If we accept this, then Boeing could make a business case for compensating employees in ways that boost retention such as a defined benefit plan.
But the C-suites aversion to these plans seems to outweigh other considerations.
30 million for nothingness in the e suite .. who are the value creators here – this is a heavily subsidized (with tax payer IAM $$ no less) and a unique protected enterprise – one of “capitalisms” few monopoly’s .. since it is a quasi government institution – where do the workers fit in here ? and why does wall street matter in the calculus – oh thats right , Dodge Bros/ V Ford ..
@John
A major issue for deficits in DBPs since late 1990s is the low interest rate environment (and abysmal returns from equity market after crashes), the QE & QE2 decimated any long-term financial model by actuaries.
Human has a habit of mistaking short-term phenomenon as perpetual reality.
its the carpet bagging bloodsuckers on wall street making those arguments ..
Agreed. There is no reason that everyone cannot have
a defined-benefit pension: it’s cheaper to administer and to implement than are the massively stupid individual 401Ks. The bloodsuckers’ beef is that they don’t get a cut that way..
evil.
defined benefit pension plans are tied to the company. if you change jobs it doesn’t follow you and depending on the vesting rules you may lose benefits or have them frozen at a level that does not reflect even a fraction of the likely value of an index fund 401k.
companies routinely underfund, borrow from, and fund with company stock, defined benefit funds, because the laws, written by them and rubberstamped by bought and paid for politicians, allow them to. when the company tanks, your pension goes with it. if you are lucky the Govt takes it over and you at least get a fraction, but that doesn’t always happen, and has shifted the burden of your pension to the taxpayer.
defined benefit plans were constructed at a time when the average worker only lived ~6 years after retiring, today the average worker lives 15 or more after retiring. the funding level necessary to support that is not built in to the (few remaining) existing plans, nor the laws that govern pension funding.
a 401k with a (in this case) 12% match, invested sensibly (mostly index funds) is both portable, under control of the worker, and importantly has defined costs to the company with minimal ability of the company to pull shenanigans by underfunding it etc.
“.. does not reflect even a fraction of the likely value of an index fund 401k”
You may be surprised of the equity market return in say ten years, bond may give you better return. Ask any (true) market historians.
Defined benefit pensions are fossils from the past huh 🤔
Not if you work for any government agency or retire from the US military..
The strikers will never get back what they just lost the last 6 weeks.
with all due respect you are fossil in your thinking – analogous to Stockholm syndrome – you get in life what you negotiate and you negotiate well when you have leverage -down side Boeing going out of business ? most the former pension holders are dead from work related health complications
Remember, Boeing PREVIOUSLY announced a 17,000 employees-at-all levels layoff! They can afford a new contract now!
Thats because the current and likely production numbers dont match the workforce- which was based on both single and widebody rates getting up
@Dou
The lay-off plan excludes blue collar workers, at least for now.
The reaction I’m seeing is pretty tepid. A lot of members feel “Had” by the leadership. Could go either way I suppose.
2014 redex.
I suspect Jon Holden will have a job at the IAM international by next year.
The unions leadership job is to negotiate – 2019 was the time to get a mega deal , not 2024.
Staying on strike for another 2% after another month ? . Maybe some are looking forward to that .
“.. 2019 was the time to get a mega deal , not 2024.”
Srsly?? Don’t you remember the 737 MAX was grounded in 2019 and BA was bleeding cash? Anyone who imagine BA/BCA under Muilenburg would offer a better deal is living in the alternate universe.
Jan 2019
Record revenue of $101.1 billion reflecting strong growth across the portfolio
Record GAAP EPS of $17.85 and record core EPS (non-GAAP)* of $16.01 driven by solid execution
Record operating cash flow of $15.3 billion; repurchased 26.1 million shares for $9.0 billion
Total backlog remains robust at $490 billion, including nearly 5,900 commercial airplanes
Cash and marketable securities of $8.6 billion provide strong liquidity
https://investors.boeing.com/investors/news/press-release-details/2019/Boeing-Reports-Record-2018-Results-and-Provides-2019-Guidance/default.aspx
Lol.
Boeing 2019 Q3 result:
Operating cash flow Q3: -$2.4b;
BCA result: 3Q19 / 9mths 2019
Revenue: $8.2b -41% / $24.8b -39%
Loss from operations: -$40m / -$3.8b
https://investors.boeing.com/investors/news/press-release-details/2019/Boeing-Reports-Third-Quarter-Results/default.aspx
Good. Lot’s of work to do. Get those aircraft off the assembly lines.
I own Boeing stock at these current levels, IMHO this is a gift to us shareholders as I expect Boeing to (eventually) get through this turbulence.
I would like to see Boeing HQ moved back to the Seattle area as well – it’s rightful place.
Sounds quite promising for the IAM, and I look forward to their vote on Wednesday. Maybe Boeing can get back to building planes soon.
Remember 401k is your money. Pension plan is not guaranteed unless government steps in.
401k have higher fees than a defined-benefit pension, and are not (at all) guaranteed. It’s not an accident that virtually everyone prefers the latter- given the choice.
@Vincent
Choose your poison. Market risk or Boeing solvency risk.
A defined pensions could be your money.
It would require changes in law and that is not going to happen in any time soon, but its the way the law was written that ties it to a company.
Change ti to a central fund that the company can’t touch and has to fund, and then its safer. Well as safe as the economy.
Equally the vestment period (5 years when I had that) and I got cut off at 4 years a a few months. One guy was within spitting distance of 5 years and lost it.
Some of us were in job situations we could have transferred to another section of the company as the skill levels were the same. We were blacklisted.
Power keeps power and …….,
If you think defined benefit pensions are the “cat’s meow”, talk to some of the airline employees that saw their pensions disappear — even after retirement! All it takes is a bankruptcy strategy to dump the obligation.
No aircraft guaranteed but its interesting see how 737 Max replacement is not going to happen until mid 2030 (so Airbus can plan according)
Next Airplane Program While the company says the replacement for the 737 Max is not going to happen until the mid-2030’s, it’s extremely important that we never let this company have the kind of leverage they had over us in 2011 and 2013/14 when they freely, with the help of elected officials, threatened our livelihoods, our families, and the communities we live in. We had to take a stand and get a guarantee for the next commercial program before it is announced. Attaining this was critical for securing our jobs going forward. We vowed to never let this company have the power to threaten us again. What we achieved in latest proposal: We were successful in getting a guarantee that, if the company launches a new commercial airplane program during the life of the agreement, it will be placed in WA and OR.
..and the check is in the mail, and I won’t..
just say 2035 is launch of the new aircraft….give the 737 to 2040 production…and 25 years service life after final aircraft of the line
737 75 year production run and 100 years of 737 in airline service?
too little to late
@Pritchard
You may not be too far off. I really don’t see 2035 launch though. Industry moves slowly but not that slowly. Boeing will either innovate or wither by then
Boeing and Airbus has to wait for a new engine giving 15-25% better fuel burn or really 2 competing ones with similar performance. That is not an easy and quick task. Both know how to make a slender carbon wing installed in an Al-Li fuselage that can give a 5% performance improvement for a 200-250 seater. So even if CFMI can flight test a 20% more efficient engine they will wait for RR/PWA to present something similar before committing the 12-25 $bn to launch a new aircraft family.
@Pritchard
It’s a symbolic win but it does set a tone.
Prediction that in 2028 the talk of the “next plane” will be front and center. There are some other things that will come up as well. Does this mean 100% producton in Washington? Is there a guaranteed machinist headcount that is contemplated. Devil is in the details.
We’re nearing the end 0f 2024. The last clean sheet developments took 7 years, more if you tried to shorten that time by force. So we’re already in 2032 for the earliest possible EIS of a clean sheet program started NOW.
737 MAX is a $70 billion $$ program – they wouldnt replace it even if they could .. and actually it is a crazy optimized aircraft – and the structures design are superb – FBW is really only good for the build rate efficiency ( IE humping them through the factory ) – not airplane performance .. airlines only care about making money – customers only care about a 3rd party interior ..
so that’s good news for Comac in the Southeast Asia and African markets
COMAC is a Chinese A320 .. an all new “26 year old ” airplane … wont be certified for a long time – sufferers from same supply chain problems as Boeing and Airbus – who you going to get to qualify all those new production certificates when FAA dont work more than 8 hours a day, not OT and not on weekends ?
The number one thing that really matters to most of the employees including new hire is a pension..
It doesn’t seem like everybody’s going to be able to benefit from their new pension clause only about 18000 employees. So that means anybody hired on recently or in the last 9 years don’t get a pension. And we all know what happened in 2008 to a 401ks
I think the biggest fallout out of this whole strike situation is how the new CEO operated at this time:
Meet the new boss,
Same as the old boss.
We don’t get fooled again.
New planes? Ja, right. Insane executive bonuses? Count on it? They’re issuing new shares as we speak to pay for his yacht.
judgement .. buying a 4 million $$ Home while demanding austerity from the value creators .. the pension demand is a matter of principle instead of shared destiny .
Same as the old one? The old one would’ve had a 737 factory already built in South Carolina and would’ve told the union to go F themselves.
Nope. That cost a lot of money. That happened when McNenearyney had not gotten Boeing as liquidated as it is now.
It would be a good project to calculating how much McNenearney cost Boeing.
Of course the more recent ones have just been inept though coonti8nuing the slow liquidation.
Equally amazing at damage done to Boeing vs their (compensation). 100X the damage to 1/100 paying them.
Kind of like killing a whole Herd of Golden Gooses to get the one egg.
If it was not so sad it would be funny
Mc Nerneys first cost cutting contributing to his 45 million compensation package – eliminating the surplus store .. and sending all those tub skid divers packin ..
SC is struggling to meet production goals which everett exceeded on a “surge” line .. tell me more about “skill” and “aerospace culture”,, I wont argue about SC BBQ ..
Anyone would argue how great the 401(k) is should look up the history of DJIA, it didn’t reach another ATH from 1929 until 1959, almost three decades later!
who argues
Defined benefit pension plans are a fine thing but basically only exist in the public sector now where it’s the public’s (taxpayer’s) money that is being spent.
A 7.3% raise
Amazon raises pay of U.S. hourly workers in fulfilment, transport ops
“Amazon.com is raising the pay of its fulfilment and transportation staff in the United States by at least US$1.50 an hour and handing out free Prime memberships as benefits, it said on Wednesday. The company will spend over US$2.2 billion on the hikes that will take the base salaries of hourly workers to more than US$22 an hour, and more than US$29 an hour including benefits.”
https://www.ctvnews.ca/business/amazon-raises-pay-of-u-s-hourly-workers-in-fulfilment-transport-ops-1.7042711
A 47% jump from 2022
Back in 2022:
Amazon warehouse workers earned at least $15 an hour
Amazon also raised the base salary cap for its office workers from $160,000 to $350,000
30 million for nothingness in the e suite .. who are the value creators here – this is a heavily subsidized (with tax payer IAM $$ no less) and a unique protected enterprise – one of “capitalisms” few monopoly’s .. since it is a quasi government institution – where do the workers fit in here ? and why does wall street matter in the calculus – oh thats right , Dodge Bros/ V Ford ..
Reading that mechanic commentary on social media is mostly against the latest offer.
Maybe Boeing should have raised wages 40% rather than 35%. Seems this is not a time for penny pinching. After all, was 20+ years of penny pinching that turned Boeing into the hot steaming pile it is now
Maybe Boeing is still controlled by people who would rather go out of business than pay more than the absolute minimum for anything.
We’ll see how the vote goes.
Myself , I support MBGA = Make Boeing Great Again.