Leeham News and Analysis

Week 1, Boeing-IAM strike

For the duration of the IAM strike against Boeing, we’ll divide updates into weeks (Week 1, Week 2, etc.). Any special, breaking news will be its own posting. The Weekly updates probably will consist of linking significant news stories but may also include any tidbits we pick up.

Update, September 10:

Washington Post: Outsourcing key to strike.

Seattle Times: Outsourcing key issue; economic issues not insurmountable.

Update, Tuesday, Sept. 9:

New York Times: Boeing strike dynamics changed.

Seattle Post-Intelligencer: 1986 strike averted with bluff.

Defense Industry Daily: DID has this lengthy story about the potential impact of the IAM strike on a variety of programs.

Associated Press: IAM strike fund good for six months.

Associated Press: Suppliers look for silver lining in strike.

Outsourcing is a key strike issue for the IAM. Marketwatch has this story reporting that an analyst thinks outsourcing will help Boeing recover from the strike within six to nine months if the strike is 60 days or less.

Fitch says Boeing’s ratings and cash flow can be affected by a long strike but Boeing will recover once the strike is over.

Update, Monday, Sept. 8:

Seattle Post-Intelligencer: Interview with the head of the IAM.

Business Week: Why isn’t Airbus on strike?

Update, Sunday, Sept. 7:

Wall Street Journal, Outsourcing crux of Boeing strike.

Wall Street Journal, Strike may cost $100m a day.

Seattle Post-Intelligencer, No sign of talks.

Reuters, Global Supply Chain for Boeing.

Breaking News: IAM-Boeing strike is on!

From the IAM website, 3:45pm PDT Sept. 5:

The Strike Is On!

Brothers and sisters:
The strike will commence at one minute after midnight tonight. This Company disrespected the process, bargained illegally and most of all, disrespected the finest Aerospace workers anywhere on the planet by failing to meet your expectations.

Despite meeting late into the night and throughout the day, continued contract talks with the Boeing Company did not address our issues. Armed with your strong strike vote, the IAM Negotiating Committee continues to try and convince the Company to meet our members’ demands.

Your Negotiating Committee appreciates the support of all of our members during this interim time period and will appreciate your continued support as we picket the gates at 12:01 a.m. Saturday, September 6.

I want to thank the mediation service, who diligently tried to help secure a contract short of a strike to avoid hardships on our members. Unfortunately, those services did not secure an offer.

We are ON STRIKE at 12:01am tonight.

If this Company wants to talk, they have my number, they can reach me on the picket line.
In Solidarity
Tom Wroblewski
District President and
Directing Business Representative

From Dominic Gates at The Seattle Times:

BREAKING NEWS: Machinists strike is onAfter the failure of a last-ditch bargaining effort, Boeing machinists will go on strike from midnight tonight.
“The strike is on,” said Mark Blondin, speaking from Orlando Fla., where talks between the top International Association of Machinists union leaders and Boeing executives in Orlando, Fla., failed to reach agreement and ended today at about 3:00 Pacific Time.

“We just didn’t get to a place where we could reach an agreement,” Blondin said. “”We tried to exhaust every avenue.”
“We met with the mediator last night and all day today,” he said. “There was no formal offer to bring back to the members. There’s nothing to bring back.”

At the expiry of a 48-hour extension of the contract to allow time for the Florida talks, some 27,000 workers will go on strike and production of Boeing jets will cease as machinists stream out of the plants and set up pickets at the factory gates.

About 25,000 machinists work in Boeing’s factories along Puget Sound, some 1,200 in Portland, 700 on Wichita, Kan. and about 70 at Edwards Air Force Base in California.

Our take:

“Going into the mediation, I thought that the gap was too wide for Boeing and the IAM to reach an agreement in 48 hours,” said Scott Hamilton, managing director of Leeham Co., an aviation consulting firm based in the Seattle suburbs. “While the gap between the 11% wage hike offered by Boeing and the 13% sought by the IAM was, I think, probably the easiest issue, the step-ups in the wage scale (six years in the Boeing proposal, three years sought by the IAM) may have been contentious.

“Health care and retirement benefits were extremely important to the union and equally so to Boeing. The IAM’s desire to limit future out-sourcing was probably a show-stopper. I think this has the makings of a long strike.”

Full story from The Seattle Post-Intelligencer, 4:10 PM PDT.

A long story from KING5 News.

From MyNorthwest.com.

Boeing’s statement, 4:14 PM PDT:

Boeing Statement: Renegotiation Fails; Strike Called
Friday September 5, 7:14 pm ET

SEATTLE, Sept. 5 /PRNewswire-FirstCall/ — Boeing (NYSE: BA – News) issued the following statement after mediated talks with the International Association of Machinists and Aerospace Workers concluded today without reaching agreement on a new collective bargaining agreement, covering nearly 27,000 employees mainly in Washington, Oregon and Kansas:

“Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement. Unfortunately the differences were too great to close,” said Scott Carson, president and CEO of Boeing Commercial Airplanes.

The IAM has called for a strike to begin at 12:01 a.m. Saturday, Sept. 6. Boeing operations in Washington, Oregon and Kansas will remain open. Employees who are not represented by the IAM are expected to report for work as normal.

During the work stoppage, Boeing will support its customers and their airplanes in service. The company will continue delivering airplanes that were completed prior to the strike, and will continue providing customers with spare parts. Boeing does not intend to assemble airplanes during the strike.

MSNBC story, 4:10 PM PDT: Strike could cost Boeing billions.

Wall Street Journal story: Labor talks fail.

Update, 6:35 PM: Boeing is holding a press conference that so far is reiterating the statement (posted above) and a recap of its “best and final offer.” Boeing has been in contact with suppliers to tell them whether to ship parts, store them at their facilities or stop producing parts. No names were mentioned.

Boeing did not identify sticking points.

Boeing did explore options but the spokesman did not know details. The future “we are interested in speaking to the IAM and we’re open to that and when we hear from them, we’ll do that. There have been no new meetings” scheduled.

That’s it for the conference.

Nothing new from the IAM at this time.

Update, 6:55 PM PDT: We just spoke with the IAM spokesperson, and it seems there is some common ground with Boeing after all. Tim Healy, the Boeing spokesman, said he didn’t have any details because he wasn’t in Florida during the negotiations there. Connie Kelliher told us she didn’t have any details because she wasn’t in Florida, either. Just as Healy could not provide any details about what was discussed and where the impasse lies, neither could Kelliher. Like Healy, Kelliher restated the IAM position.

Healy said Boeing will wait for the IAM to call; the IAM leadership said it’s up to Boeing to call, and they can be reached on the picket lines.

Countdown to Midnight for Boeing, IAM

Update, 11:50 AM PDT Sept. 5: Innovation Analysis Group has a 15 minute podcast with Jon Ostrower of Flightblogger. Ostrower is on-site at Everett and Renton and talks about what amounts to an “in-plant strike” by the IAM. Among the things Ostrower notes is that this action probably is resulting in daily missed deliveries for the 737s. We know that there were delivery delays prior to the strike vote as well.

Midnight tonight Seattle time is the deadline for Boeing and the IAM to reach an agreement to avert a strike authorized by an 87% vote of the union membership Wednesday.

Boeing’s Portland and Puget Sound units are in the Pacific Time Zone but the Wichita unit is in the Central Time Zone, while negotiations continue in the Eastern Time Zone. A Boeing spokesman said the deadline is based on the Pacific Time Zone, so it’s not clear if Wichita workers must wait to 2 AM CDT for a strike or whether they might walk out at midnight CDT. We presume Wichita would have to wait to the Pacific time zone deadline. The spokesperson for the IAM could not be immediately reached for clarification on this point. The Wichita unit has about 700 workers.

Update on the time-zone issue: Wichita, it appears, can walk off the job at midnight CDT, 10 PM PDT.

Boeing will issue a press release either at Midnight PDT or before (if a conclusion is reached). The IAM’s plans are unknown pending reaching the spokesperson.

We’ve updated our “Morning After” posting below twice this morning; any further updates today will be in this post.

Morning after IAM Strike Vote/with updates

Update, 9:30 AM PDT Sept. 5: Dominic Gates of The Seattle Times just posted this insightful story on negotiations. Gates paints a dramatic picture of events leading up to the decision to suspend the strike for 48 hours to midnight tonight while negotiations continue.

Update, 8:10 AM PDT Sept. 5: Jon Ostrower of Flightblogger picked up on a story none of the local Seattle media has, and that’s why the IAM agreed to mediation. It’s an important element the IAM leadership did not discuss Wednesday night when they told their membership they were returning to the bargaining table for 48 hours. This turned an enthusiastic crowd into a hostile one, hostile to their own leadership. This reason still hasn’t been explained to the membership. Here is Jon’s report:

According to one veteran machinist deeply familiar with Boeing/IAM labor policy, had the IAM refused to accept the help of a federally appointed mediator and the 48-hour extension, immediate beginning a strike, the IAM would have been deemed negotiating in bad faith, opening themselves up to legal action.

Article 24 of the existing contract allows for a potential extension of up to 1 year if the union agrees to it. It has never been done for this long, though it was done for 5 days in 1986 to give additional time to the Union membership to see the changes to the contract and vote. The same could be done this time around to call for a vote later this weekend without going on strike. A simple majority (50%+1) is required to approve the new contract.

The link to Jon’s full posting is here.

Meanwhile, the IAM contract website has several updates, including a video. There is nothing new on the Boeing contract website beyond the election night disappointed-with-results press release.

(Following section from Thursday morning with this original post.)

We may be updating several times today with news and analysis.

Our first take on the morning after: the salient points from last night are:

• The vote was a stunning rebuke to management. The vote to reject the contract was 80% and the vote to strike was 87% (we don’t know how to explain that one). Boeing had hoped for a majority vote in favor of the contract and would have settled for a one-third-plus-one vote against a strike (which would have prevented a walk-out, since a third-thirds vote is required by the IAM by-laws to strike).
• The workers are angry and they want to walk the picket lines.
• Having the strike postponed for 48 hours for mediation enraged the membership with their own leaders.
• The leadership, booed and shouted off the podium last night, and emboldened by the overwhelming vote, probably will be very aggressive with Boeing negotiators to seek everything the union proposed in the first place.
• The membership will want to walk out unless they see a total capitulation from Boeing.
• Doug Kight’s remark that Boeing is coming back to the table without a new offer and to listen to understand what the issues are will only add fuel to the fire. Kight is the Boeing negotiator.

What we think will happen now: unless Boeing capitulates–an unlikely prospect–we think a strike will occur at 12:01 AM Saturday. The union membership is angry and wants to make a point. With outsourcing a key issue for them (among others), and one on which Boeing doesn’t want to budge, we think the 48 hour stand down only postpones the inevitable.

Seattle Times: Strike on holds 48 hours.

Seattle Post-Intelligencer: Boeing avoids strike for now.

Flight International: Last ditch talks.

Bloomberg News: Strike delayed for talks.

Chicago Tribune: IAM votes to strike; engineers are next.

Update, 12:45 PM PDT: Here is a 13 minute podcast with James Wallace, the aerospace reporter for The Seattle Post-Intelligencer, about the strike vote and 48 hour stay.

Here is a press release from the engineers’ union, SPEEA, in support of the IAM.

Flightblogger has this report from a pub across from the Everett plant, where IAM workers frustrated with the 48 hour strike-stay congregated into the wee hours Thursday morning.

James Wallace of The Seattle P-I obtained a memo sent by Boeing CEO Jim McNerney to all employees following the strike vote.

Dominic Gates of The Seattle Times has this story on Boeing, the IAM and Mickey Mouse.

Investor blog Motley Fool says Boeing should let the IAM strike.

IAM risks Boeing moving jobs to right-to-work states, reports this Reuters article.

Boeing: IAM votes to strike

Sept 3, 645PM PDT: We are at IAM HQ watching the vote count. By eyeball only, things look discouraging for Boeing.

Update, 7:30PM PDT: No vote tallies posted but eyeballing stacks continues to suggest it’s discouraging for Boeing. No information about if all the votes from outlying areas have been delivered for counting, but by this hour they should have been.

Update 7:45 PM PDT: All votes delivered. Individual table counts show 75%-80%+ for a strike.

Update 8:15 PM PDT: IAM just reported that results now expected about 9 pm.

Update, 8:45 PM PDT: IAM warming up the press room for announcing the results. Standing by.

Update, 9:03 PM PDT: Still standing by; press room filled with “On Strike” signs.

Update 9:38 PM PDT: The strike is on; the vote to strike is 87%; the vote to reject the contract is 80%; workers hit the line at 12:01 tomorrow; Boeing to hold response press conference in an hour or two.

Stunning surprise, 9:45 PM PDT: Governor’s office, mediator’s office asked IAM to extend contract, mediate; leadership agreed for 48 hours; membership is booing. They want to hit the line now. IAM lead negotiator Mike Blondin gives Boeing 48 hours to reach a deal. Crowd turned ugly on Blondin in an instant. Drowning out Blondin; cannot hear him. Blondin says we will meet with mediator and back in 48 hours. Strike is off for 48 hours.

Our take: This was an outcome that nobody predicted, and the IAM membership is irate–to put it politely–with its own leadership. Clearly Boeing miscalculated everything leading up to this vote. With the huge backlog, unhappy 787 customers and large oversales for the 737 line, it appears that Boeing has blinked–but appearances may or may not be accurate. See the Update below from the Boeing press conference.

We’re signing off and heading over to Boeing HQ for their press conference.

Update, 11:59 PM PDT: Boeing’s chief negotiator, Doug Kight, told a press conference following the vote that Boeing is responding to a request of the federal Mediation and Conciliation board to return to the bargaining table.

Kight reiterated Boeing’s belief that it offered the best contract in the aerospace industry.

“For mediation to be successful both sides have to focus on key issues,” Kight said. “The key for us will be to continue to listen and understand. We need to listen to the union and understand specifically what the issues are.” Read more

Big Week for Boeing

Update, 10:30 AM PDT, Sept. 3: IAM members are voting today. There is a last-minute flurry of activity by Boeing, IAM and the media.

KIRO Radio news: Boeing machinists voting.

KIRO Radio News: To broadcast the vote results live at 8:30pm PDT. See the URL at the top of the page.

IAM’s last minute appeal: At the main website.

Boeing’s last minute appeal and their main messaging site with a radio ad from BCA President Scott Carson and other messages.

Voting continues to 6 PM PDT; the first vote tallies are expected between 6:30 and 7 PM, and a trend may be evident with these initial results.

Big Week for Boeing

This is a big week for Boeing. Wednesday executives will find out if members of the International Association of Machinists will strike. This week the Department of Defense is expected to issue its Final Request for Proposals in Round Three of the KC-X aerial tanker competition for the USAF, and Boeing will learn whether DOD is going to give the company six months to propose a bigger airplane than the KC-767AT.

First, the IAM

The IAM votes tomorrow (Sept. 3) on whether to accept the “best and final” contract offered last Thursday by Boeing. We have been posting the Boeing and IAM positions and statements on this site, so we won’t re-link any of that information here.

Boeing took a big gamble by releasing information throughout the process. On the one hand, these trial balloons enabled Boeing to gauge reaction. On the other, some of the so-called take-aways inflamed the IAM membership and may have had the opposite effect Boeing had hoped for.

The IAM leadership recommended that the membership reject the contract and strike. Union by-laws require a two-thirds of the membership to reject the contract. Thus, if 33.34% of the membership votes to accept the contract, Boeing wins. This is what happened in 2002 when Boeing received 34% of the vote and imposed the contract then that froze salaries and had other take-aways. Some Boeing officials believe this set the stage for the 2005 strike that lasted a month. Boeing wants a majority vote this time, however, and one of the sweeteners in the contract is a bonus if 50% of the membership votes to accept the deal. Read more