Subscription Required
By the Leeham News Team
Analysis
Sept. 5, 2024, © Leeham News: There seems to be quite an expectation that there will be a strike by Boeing’s touch labor union, the IAM walkout at Boeing this contract cycle. The costs associated with a strike are well understood. Crippled cash flow, upset customers, and stock price losses not counting the damage to the companies in Puget Sound that built much of their business models on Boeing worker’s paychecks. It’s never a good thing to sustain a strike of any duration because the disruptive effects can last for years.
The last time the IAM struck was in 2008, for 57 days. The strike cost Boeing billions of dollars in lost revenue, much of which was made up in the following years. The ill-will generated by the strike affected customers. Management-labor relations remain strained to this day. Union leadership is determined to recover previous givebacks in wages and benefits. They want a seat on the Board of Directors, a role in improving Boeing’s safety culture, and a guarantee that the next airplane will be assembled in Puget Sound.
Talks remain far apart, according to the union. Boeing says progress is being made. A strike seems likely at this stage.
Boeing is clear about a strike potential. In a message last week to employees, Boeing said:
Does Boeing want a strike so it can stabilize production or allow time for the supply chain to recover?
Absolutely not. Any work stoppage, whether days, weeks or months, would disrupt our production system, supply chain and most importantly, our customers. When Boeing cannot deliver airplanes as scheduled, customers question our reliability. A strike would only help the competition and hurt our suppliers.
What is Boeing supposed to do if the IAM walks out? The usual answer is sweeping and cleaning and trying to deliver whatever you can sneak out the door to keep the money coming in. It is never a very effective way to operate.
Here are some points to ponder if the strike occurs and Boeing production shuts down.
Subscription Required
By The Leeham News Team
Aug. 26, 2024, © Leeham News: Boeing’s in contract negotiations with its touch labor union, the International Association of Machinists District 751 (IAM 751). The powerful union wants a 40% raise over the life of a four-year contract. Leadership wants to recover medical co-pays and reinstate a defined pension plan, given up in previous contracts.
The union also wants a guarantee that the Next Boeing Airplane (NBA) will be built in the Seattle area. Boeing’s executives used the threats of relocating 737 MAX and 777X assembly elsewhere to wring economic concessions out of 751 members in previous contract talks.
The contract expires on September 12. The union membership already has voted to authorize a strike on September 12 if the contract offer is voted down.
This time, the membership believes it is in a stronger bargaining position. Boeing’s weak financial position is viewed as playing right into labor’s strength. Jon Holden, president of the union, echoed those sentiments. “We understand our power. We are ready to use it,” Holden told The Seattle Times. Holden was also not going to let management off the hook, due to the poor financial position Boeing finds itself in, he told the newspaper. “It’s not about whether they can afford to pay us. That’s not even a question,” he added. “They can.”
But the ultimate question is, How can Boeing afford to pay what the union wants?
Here’s how.
Subscription Required
By the Leeham News Team
July 22, 2024, © Leeham News: Boeing’s (BA) largest union in Seattle, the International Association of Machinists and Aerospace Workers (IAM) District 751 – voted overwhelmingly to authorize a strike if contract negotiations fail.
Thousands of members attended a rally at T-Mobile Park, home of the Seattle Mariners baseball team, during which “nearly” 99.9% voted to empower the union to strike, according to IAM representatives.
Workers in Washington State are seeking a 40% pay increase in an attempt to claw back concessions previously given to the company by the union. The Local represents over 30,000 members in the region, which includes the plants in Renton and Everett, where the 737 Max and 777 aircraft are assembled.
The current labor contract will expire on Sept. 12, 2024. With a successful mandate granted by the rank and file, leverage will be applied to Boeing in upcoming negotiations. “We want the company to take our proposals seriously and bargain earnestly,” said Jon Holden, President of IAM District 751.
It’s been 10 years since the last contract was approved. The basic contract was entered into after a 57-day strike in 2008. Boeing’s CEO at the time, Jim McNerney, then demanded concessions the following year in return for locating a second 787 assembly line in Everett (WA), the assembly plant for widebody airplanes. The IAM offered concessions, which Boeing said were inadequate, and the second line went to the production facility in Charleston (SC).
By Scott Hamilton
May 16, 2024, © Leeham News: Even as Boeing is under fire for safety issues, the company’s battles heat up.
Subscription Required
By Scott Hamilton
Analysis
Jon Holden, president of the IAM 751 union that assembles Boeing’s airplanes in the greater Seattle area. Credit: IAM 751.
March 25, 2024, © Leeham News: Boeing’s largest union, the IAM 751, will seek a seat on the Board of Directors in its contract negotiations that began on March 8.
The union assembles Boeing’s airplanes in the Renton and Everett (WA) factories.
LNA wrote in January 2020, when David Calhoun became CEO of The Boeing Co., that labor representation was needed on a Board of Directors that was filled with politicians, defense and finance people—but none versed in safety or even commercial aviation production. Commercial aviation was Boeing’s largest profit center for decades before the 2018-19 737 MAX crisis began.
The day Calhoun assumed his position on Jan. 13, 2020, LNA published a list of things facing the new CEO. Among them was a need to reconstitute the Board. Included in this was a suggestion that members from the IAM and Boeing’s engineering and technician union, SPEEA, be appointed (among other specific ideas).
About half the Board has changed since then, resolving some but not all of the issues raised—but neither the IAM nor SPEEA have representation on the Board.
On Jan. 29 of this year, LNA opined that the forthcoming labor contract negotiations with the IAM 751 was a good opportunity to begin changing the culture at Boeing. The following March 15, The Seattle Times editorialized the same theme (also citing our report in the process).
The administrator of the Federal Aviation Administration, Mike Whitaker, slammed Boeing’s culture in a March 19 interview with NBC Nightly News.
“There are issues around the safety culture in Boeing. Their priorities have been on production and not on safety and quality. So, what we really are focused on now is shifting that focus from production to safety and quality,” Whitaker told news anchor Lester Holt.
Subscription required
By Dan Catchpole
Updated 2:35 p.m., March 4, 2024
The IAM 741 began promoting a strike fund for 2024 Boeing contract negotiations in 2019. Source: IAM 751.
March 1, 2024 © Leeham News: When representatives from Boeing and the Seattle-area machinists union start formal negotiations on Friday, the context will be a world apart from when they bargained the existing contract 10 years ago. Back then, Boeing management had a new airplane program (777X) as leverage and exploited an internal fight in the International Association of Machinists and Aerospace Workers to push through a concession-laden contract.
Now, Boeing is battered after years of self-inflicted crises, a pandemic and problem-riddled supply chain, and, after decades of defeats, labor has scored major victories around the country, especially in aerospace.
Head of District Lodge 751 Jon Holden told Leeham News & Analysis during a recent interview that he is determined to get back what was taken from the roughly 31,000 members he represents in the Puget Sound area.
The union wants better work-life balance, better pay and retirement benefits, and guarantees that will keep it healthy for years to come.
Given its ongoing struggles, Boeing can little afford to alienate the union representing the vast majority of people assembling its commercial jetliners, industry analysts say.
However, Boeing management and the IAM have had a rocky relationship since workers at the company organized in 1935. In the past 20 years, company leadership has taken a hard line against organized labor and repeatedly pushed for concessions despite banking substantial profits and spending billions on share buybacks.
A Leeham News Editorial
Jan. 29, 2024, © Leeham News: If Boeing is to emerge from its latest crisis unscathed, it will need to commit to a culture change. That’s the consensus of industry watchers, and it’s one that we whole-heartedly endorse.
CEO Dave Calhoun will have a chance to show his commitment to that change starting in March, when Boeing Commercial Airplanes top management sits down with the bargaining team for its largest touch-labor union, IAM District 751.
For 20 years, Boeing has prosecuted a scorched-earth fight against its unions, in the name of cost-cutting. It has outsourced work all over the globe. It has built a whole new campus in union-hostile South Carolina, primarily to escape the “hostage” situation it faced before, with all of BCA’s deliveries at the mercy of one unionized labor force.
But while Boeing has won every battle in this long labor war, the result has not been a strategic victory. Instead, in 2024, the company finds itself badly trailing Airbus in both orders and deliveries, with little chance of catching up in the near term. This is in large part due to a series of high-profile self-inflicted failures, of which the near catastrophe on Alaska Flight 1282 on Jan. 5 is just the latest.
Boeing needs a top-to-bottom change of culture, and it can start by rebuilding its relationship with its touch-labor union.
Subscription Required
By Scott Hamilton and Judson Rollins
Jan. 29, 2024, © Leeham News: Twenty-twenty-four will be a crucial year for Boeing.
A door plug blew off a Boeing 737-9 MAX Jan. 5. The company must deal with the fallout on its 2023 year-end earnings call Wednesday. Credit: Capt. Chris Brady.
An unexpected twist is the crisis from Alaska Airlines Flight 1282, in which a door plug blew off a 737-9 MAX at 16,000 ft. Nobody died, and injuries were light. But the MAX 9 fleet was grounded in the US by the Federal Aviation Administration. The FAA launched a formal investigation into the “quality escape” that is believed to have led to the accident. Last week, the FAA put a freeze on current production rates of the 737 and, for now, killed Boeing’s plans to add a line at its Everett (WA) plant.
Beyond dealing with the 1282 aftermath, Boeing hopes this year to clear its inventory of 737 MAXes and the 787. Clearing the inventories brings cash and some profits. But will this move to the right while Boeing is under even more scrutiny by the FAA?
Boeing planned to be positioned for 2025 to pay down debt incurred during the MAX grounding and the COVID-19 pandemic. Progress toward free cash flow targets of $10bn per year by 2025/26 was forecast at its Nov. 2, 2022, investors day. This is almost certainly inoperative.
By Scott Hamilton
Analysis
Special Coverage of the Boeing Crisis
Jan. 26, 2024, © Leeham News: At the first commercial aviation conference following the Alaska Airlines Flight 1282 Boeing 737-9 accident on Jan. 5, much of the conversation was about the fallout to Boeing. Spirit AeroSystems was a topic of less conversation, even though the problem with 1282’s door plug appears to have originated with Spirit.
Aviation Week’s supplier conference was supposed to begin with a fireside chat with Boeing’s Ihssane Mounir, the head of Boeing’s commercial supply chain. Unsurprisingly, Mounir canceled the week before as the Alaska accident—in which there were no fatalities and only a few minor injuries—expanded into a full-blown crisis for Boeing.
News that the Federal Aviation Administration dropped the hammer on Boeing by freezing current 737 production rates and killing, for now, expansion of the airplane’s final assembly to the “North Line” in Everett (WA) brought disbelief that Boeing has fallen so far from what was once considered the Gold Standard of American engineering.
And, with contract negotiations beginning in March with its touch-labor union, the IAM 751, aerospace analyst Ron Epstein of Bank of America predicted that 751 has more leverage now than in recent years and Boeing will be in the weaker bargaining position.
Other than consultant Richard Aboulafia, a vociferous critic of Boeing CEO David Calhoun, speakers were willing to definitively call for changes in Boeing’s leadership. But in sideline talk, consensus was clear: “leadership” at Boeing headquarters and in Seattle with Commercial Airplanes has to go.
But there was no agreement, or even suggestions, about who should replace Calhoun and Stan Deal, the CEO of Commercial Airplanes.
UPDATING (2)
By Dan Catchpole
Special Coverage of the Boeing crisis
The Federal Aviation Administration froze Boeing’s 737 production rate at the current level (31/mo, 372/yr) and for now killed expansion of a 4th line in Everett. Credit: Leeham News.
Jan. 24, 2024 © Leeham News: The Federal Aviation Administration said Wednesday it will not approve a planned expansion of Boeing 737 MAX production. The agency also laid out a path to get MAX 9 airplanes back flying.
The jetliners were grounded on January 6 after a door plug blew out the day before from a two-month-old 737 MAX 9 flown by Alaska Airlines. The FAA investigation found significant quality lapses in the program. Inspection of the MAX 9 fleet found problems in other airplanes.
A few of Alaska’s Boeing 737-9 MAXes parked at SEA-TAC International Airport awaiting return to service. Credit: Brandon Farris Photography.
After grounding the 171 MAX 9 airplanes operated by Alaska (65) and United Airlines (79), the FAA “made clear this aircraft would not go back into service until it was safe,” FAA Administrator Mike Whitaker said Wednesday in a public statement (Emphasis added). “The exhaustive, enhanced review our team completed after several weeks of information gathering gives me and the FAA confidence to proceed to the inspection and maintenance phase.
“However, let me be clear: This won’t be back to business as usual for Boeing. We will not agree to any request from Boeing for an expansion in production or approve additional production lines for the 737 MAX until we are satisfied that the quality control issues uncovered during this process are resolved,” he said.
“The quality assurance issues we have seen are unacceptable,” Whitaker said. “That is why we will have more boots on the ground closely scrutinizing and monitoring production and manufacturing activities.”