The vote of IAM 751 membership on the Boeing contract proposal is Wednesday, and over the weekend, some disturbing details emerged in the non-stop coverage locally.
The Seattle Times’ Dominic Gates reports that it’s now clear there is a schism between the IAM International HQ in “the Other Washington” and the IAM 751 local leadership. Readers will recall that last Thursday, Tom Wroblewski, president of the local, dramatically called the proposed contract, containing substantial take-aways (as local membership calls it), “crap” and tore up the agreement. It was entirely a symbolic move; the International decreed the vote would proceed as planned.
For someone who purportedly helped negotiate the agreement, this was odd behavior, to say the least. With Gates’ reporting, it now appears there is far more to the back story than meets the eye.
The 751 media team has been put on ice by International, and all media calls (including ours) are now referred to the International. The local leadership isn’t making statements to the press; it was an International official who spoke with Gates.
It’s now pretty clear that International is driving this train, apparently by-passing the local leadership in crafting this contract extension.
The question is, “why?” What’s in it for the International to negotiate an agreement that has so split the local membership?
Whatever the outcome, Boeing comes up a winner. If it gets contract approval, it has a divided IAM 751 membership. If the contract isn’t approved, it has a divided membership and a free hand to take the 777X to Charleston, where the 787 is also assembled, to Texas, where it has a facility, to Utah, where it has another operation (and all of which are right-to-work states), or an option to take another crack at reaching an agreement here.
In any case, it’s clear there is a split between the IAM 751 and the IAM International, and this can only benefit Boeing.
Gates’ Sunday reporting includes some language that, for a family newspaper, is pretty unusual. Coupled with Wroblewski’s “crap” and Sunday’s reporting, not since the days of President Clinton and Monica Lewinsky detailed an entirely new use for cigars has mainstream reporting been so graphic.
Here are some weekend stories:
It’s a kick in the balls but better than decapitation
Legislature Approves Boeing incentives
Anguish Many of Us Can Understand
In a break from all the doom-and-gloom, hand-wringing and controversies surrounding the IAM-Boeing stuff, Seattle Times columnist Ron Judd on Sundays takes an irreverent look at news in the Puget Sound area. He lent his wit and sarcasm to this issue in Once again, Boeing’s got our back.
With the IAM 751 membership vote scheduled for Wednesday this week, one of the biggest areas of controversy is Boeing’s plan to eliminate the defined pension benefit plan in place now and replace it with a 401(k) plan. IAM 751 is the last Boeing union with a defined plan, and Boeing has tried for years to do away with this.
IAM 751 members appear to be split over this issue.
We received a suggestion from a Boeing retiree, Donald Shuper, who is a regular contributor to our Reader Comments. A long-time shareholder activist of Boeing, he’s offered shareholder proposals (which management routinely rejected and shareholders voted down) throughout the years.
Here’s Shuper’s suggestion for a compromise on the pension plan. It will be irrelevant, of course, if IAM members approve the proposed contract but could be a basis for discussion if the contract is rejected.
A Suggested Compromise on the Pension Plan
By Don Shuper
1995 Boeing Retiree
A major sticking point for the IAM in the Boeing Proposal appears to be the freezing of the defined benefit plan (BCERP) and conversion to a defined contribution plan generally known as a 401K plan. This conversion puts all the risk for future growth or loss on the employee, while eliminating future liabilities for Boeing.
In the event the Boeing proposal is turned down by the IAM, I suggest a possible compromise on the Pension issue that might be considered. In simple terms, it would involve melding the existing Boeing PVP ( Pension Value Plan ) , also known as a Cash Balance plan with the existing BCERP Plan ( Boeing Company Employee Retirement Plan )
The PVP generally favors the younger employee, while the BCERP makes more sense for the older longer serving employee. (This is a very simplified explanation.)
For 2012 the following data applies:
Perhaps it is time for both sides to have a significant discussion/review on a possible melding of the PVP, the BCERP and the current proposal regarding age changes and 401K contributions. The aim would be to provide a guaranteed floor based on vested benefits, plus a risk component in 401k funds.
Background
From 2001 to 2004, I had a shareholder proposal on this issue which in the 2004 proxy stated:
RESOLVED: Shareholders request the Board of Directors adopt the following policy:
(1) Employees vested at time of conversion be given a choice between their old pension plans (the “Heritage Plans”) or the Pension Value cash-balance plan (the “PVP”) at time of their termination or retirement.
(2) The PVP to provide a monthly annuity at least equal to that expected under the Heritage Plans, or an actuarially equivalent lump sum.
This proposal received about 12 percent (61 million shares ) approval. Shareholder proposals are precatory, and even if passed, need not be implemented.
Suggestion
There many reasons put forth by the company as to why they did not want to implement at that time. I suggest the Boeing comments against in the 2004 proxy be reviewed as to current times.
The unions were not in favor of a total conversion to the PVP due to the increase from age 60 to 65 to get unreduced benefits.
Both sides have the capability to get expert actuarial help and analysis to make the necessary modifications to the proposal and plans.
I believe the following positives could result.
A) The BCERP plan need not be frozen since over time the general arrangement of the PVP plan when combined with the 401k plan could eventually provide better benefits for the employee compared to BCERP.
B) Boeing would retain the ability and option to use “surplus” funds ( as defined by ERISA ) in the BCERP and PVP plans into Operating Earnings. That option would not be available with the 401K plan as currently proposed.
C) Employees could have a ‘guaranteed floor’ of vested defined benefits based on their BCERP/PVP credited service and a risk component of 401K gains at least during the proposed time of the contract extension. This would ‘share the risk’ instead of ‘drop the risk’ proposed.
Suggested Links
2004 PROXY
http://www.boeing.com/assets/pdf/companyoffices/financial/finreports/annual/04proxy/2004proxy.pdf PAGES 47 TO 49
PVP PLAN
http://www.boeing.com/assets/pdf/companyoffices/empinfo/benefits/pension/spd/spd_94.pdf
BCERP PLAN
http://www.boeing.com/assets/pdf/companyoffices/empinfo/benefits/pension/spd/spd_58.pdf
Summary of Plan Finances
http://active.boeing.com/companyoffices/empinfo/benefits/news/pension_fund_2012.pdf
Here are some developments since Friday in the drama over Boeing vs the IAM 751 and Boeing vs the Legislators in Washington State in the effort to site the 777X at Everett, Boeing’s main wide-body production plant and the current location of what we’re now calling the 777 Classic:
Deadlines:
Boeing issued this statement late last night on the news the IAM likely won’t approve the contract offer in exchange for Boeing siting the 777X assembly in Everett:
All of our options are still on the table, including those within Boeing and other interest we have received from outside.
We chose to engage in Puget Sound first, but without full acceptance by the union and legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating 777X work. If this is not ratified per the scheduled union vote on November 13th, we will begin taking the next steps.
Our comment: Some IAM members evidently think Boeing is bluffing. This view is fantasy. Boeing will put the 777X elsewhere (Charleston being the obvious choice).
This is an extremely negative turn of events for Puget Sound, for Boeing and the IAM. If the IAM disapproves this contract and Boeing puts the 777X in Charleston (or Texas or anywhere else), we see open warfare between the union and Boeing, with union payback coming in 2016 when the current contract expires. The 2008 57-day strike was payback for prior outsourcing. We can easily see a strike in 2016.
Boeing will continue to move jobs out of Washington State if this deal is rejected. As distasteful as contract provisions are, it seems the IAM membership would rather cut its nose off to spite its face than to save and create jobs. We’ve seen this before. We hope we won’t see this again.
To set a flavor of member sentiment directly from them, see IAM 751’s Facebook page. When we looked last night, there were more than 400 comments, all but a handful negative.
This is a very negative, discouraging turn of events.
Other news:
Some Washington Legislators say that in exchange for tax breaks for the 777X, Boeing must commit to build all 777Xs and derivatives in this state, reports The Seattle Times. This requirement was absent from the 2003 tax breaks Washington granted Boeing for the 787 final assembly line, leaving it open for Boeing to place the 787 Line 2 elsewhere.
South Carolina is ready to step up on 777X, Tweets the Charleston Post and Courier.
It’s perhaps worth reading a couple of our own posts from 2009 when Boeing chose to put 787 Line 2 in Charleston:
It took no time at all for politics to rear its head in Washington State over Gov. Jay Inslee’s proposal for an incentive package for Boeing in exchange for siting the 777X in Everett.
Republicans, who oppose any tax hike for any reason under any circumstances, wasted no time in raising questions over the transportation tax proposal, or even if there was a need for the incentives to clinch the deal.
The IAM 751 local, which has its own problems with its membership over the proposed give-backs in the contract extension, lost no time in marshaling a team to lobby the legislators.
The Tacoma News Tribune asks why a special session is needed at all.
The IAM members vote next Wednesday, Nov. 13, on the contract. It’s unknown yet how the Legislature dynamics will play out.
With the release by IAM 751 of the summary of the contract terms to be voted on next week by the membership as one step required for Boeing to select Everett as the assembly site for the 777X, the cover letter reveals Boeing will build “buildings” totaling 1.5m sf–to “house 777X final assembly and wing production.”
The total square footage equals one-third the size of the 4.5m sf of the entire Everett Boeing plant.
A Boeing spokesman declined to comment on the IAM 751 facilities statement, saying the company isn’t commenting on the “specifics” of the contract. We learned separately that a wetland assessment has been underway at Paine Field at the prospective site; Snohomish County (where Paine Field is located) undertook the study.