If the IAM didn’t have enough reason before to be concerned about out-sourcing, here’s another: Mitsubishi just announced it’s entered a deal with Boeing for its support in building the MRJ regional jet.
The so-called Japanese Heavy is an industrial partner with Boeing on the 787 program, building the composite wings. The 70-90 seat MRJ regional jet will have composite wings. Boeing is shying away from planes with less than 150 seats in the future. If the MRJ is a success, we think it likely Mitsubishi will grow the airplane up to 150 seats, particularly since Kawasaki Industries, another 787 partner, has announced plans to create a 100-150 seat jet.
From there it’s only another step to grow into 200 seat jets and a full family. It took Airbus 14 years to create a family and 34 years to have a full product line.
This is not good for American industry. And in our view, Boeing is creating its own future competitor.
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:
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.
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
DOD Buzz has this interesting report on the prospect of a split buy for the tanker competition.
AFP, the European news agency, reports DOD/USAF officials are worried another tanker protest will be filed, no matter who wins Round Three.
Reuters has this report on a USAF general urging quick action.
Update, 12:50 PM PDT, Sept. 4: In true military fashion, it’s hurry up and wait–the final RFP for the tanker has been delayed another week, according to this report in The Hill newspaper.
Update, 4:45 PM PDT, Sept. 5: DOD has tough decision on tanker
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.
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
Note: scroll down to see Updates as events unfold.
As we expected, the IAM leadership recommended a No vote on the “best and final” offer from Boeing, setting the stage for a contract vote and a companion strike vote September 3.
Boeing expressed disappointment with the recommendation.
By IAM by-laws, two-thirds of the membership has to vote against the contract, so Boeing could prevail with only a one-third+one “yes” vote. This happened in 2002. Boeing hopes for a majority yes vote rather than a technical win.
Here is the IAM response to Boeing’s offer.
Here is an IAM summary response to the line-by-line Boeing proposal.
Here is the link to Boeing’s full contract offer.
Here is Boeing’s YouTube video about the offer, under 3 minutes:
Here is the first of what will be many local (Seattle) newspaper stories:
Seattle Times, August 29.
Seattle Post-Intelligencer, August 29.
Update, Aug. 30:
Here is a 7:25 minute video from the IAM dissecting its view of the Boeing offer.
Here is an IAM information sheet to its members of they vote to strike.
Update, Aug. 31:
This might be bad news for the IAM leadership or it might be nothing. In an unscientific poll underway by The Everett Herald, those voting on whether the IAM will get its 66 2/3rds vote needed to reject the Boeing contract offer have now falled to–66%. When we first saw the poll Saturday morning, 70% believed the IAM would reach the two-thirds mark required by the IAM by-laws to reject the contract. By the time we talked with Herald reporter Michelle Dunlop for her story published today, the vote had dropped to 687%, with more than 500 people voting in the poll.
Neither we–nor Michelle–knows how to take the poll. It’s not scientific and there is no way to prevent anyone from voting multiple times and it’s possible for Boeing management to vote, rather than restricting the vote to the IAM membership. The general public can vote as well. But having done some polling ourselves many moons ago, on the street corner in political season, we know that the greater the numbers, even in an unscientific the poll, the more accurate it is. Thus, we think the trend for the IAM leaders is not only discouraging but also now that the Herald’s poll has dropped below the 67% level this isn’t good news for the union leadership.
Everett Herald. Some union members welcome strike.
A few interesting stories today on the USAF tanker saga:
Business Week: Boeing’s tanker challenge.
Reuters: US arms buyer faults Boeing. This story quotes a Jacques Gansler of the University of Maryland who now sits on the Defense Science Board. If memory serves correctly, Northrop Grumman partially funded a study at the U of M Gansler oversaw on the tanker. No mention of this is in the story.
Note: Be sure and check out updates to posts below on the 787 and the best-and-final offer.
Update, August 31:
The Tacoma News Tribune has this long analysis on the tanker and whether Boeing should press on.
Boeing has dominated the news in recent weeks because of the tanker and the IAM contract negotiations. At long last, here’s some news about Airbus.
The company is actively talking about stretching the A380-800 to a -900, 1,000 passenger version. A new intereview with Louis Gallois, CEO of Airbus parent EADS, looks at 2010 as when this program might be launched. The story is here. Meanwhile, delivery of Emirates Airlines’ second A380 is delayed.
For all those Airbus-Northrop critics who whine about the prospect Northrop (the prime contractor, let’s remember) won’t protect and honor US restrictions on selling the KC-30 or its components to nations hostile to US interests, here’s a Reuter’s story about how Airbus won’t sell airliners to Syria as long as sanctions are in place.
Pratt & Whitney shipped its P1000G Geared Turbo Fan engine to Airbus for installation on an A340 test bed, according to this Flight International story. Airbus is considering offering the GTF on its A320 family.
Update 8:40 AM PDT, Aug. 29: EADS says there are no current discussions underway with Syria for a large Airbus order. The operative word in the statement is “currently.”
During a podcast conducted Wedesday with the IAM by Innovation Analysis Group about the contract negotiations between Boeing and the IAM, an IAM official ended the 16 minute podcast with the suggestion that Boeing may have to reevaluate its schedule for the first flight of the 787.
At the Farnborough Air Show, 787 program chief Pat Shanahan told Bloomberg News that the first flight was expected for November; schedules provided suppliers still currently list the first flight for the end of October.
The IAM official, when asked if November (Shanahan’s Farnborough prediction) was still likely, the official responded that he believes Boeing will have to reevaluate this timetable. Off-line, the official confirmed that this was exclusive of any potential strike.
We queried Boeing today about the IAM prediction, and the response from corporate communications was that the schedule for “the fourth quarter” has not changed. The spokesman on the 787 program declined to respond specifically to the November date referred to by Bloomberg (this spokesman was not at the Farnborough Air Show and did not hear Shanahan’s comments).
Chatter is becoming increasingly frequent that first flight may be in December toward year-end–which is still the “fourth quarter” published by Boeing.
Update, 6:50 AM PDT, Aug. 29: Business Week has this piece about the cost of the Dreamliner being $2bn more than expected due to the delays. See also today’s updates under Boeing’s best-and-final offer posting below.
Boeing just posted its Best and Final Offer to the IAM in the contract negotiations, and it’s going to bypass the IAM leadership and take the offer directly to the IAM membership for approval. The vote is September 3.
Here is a 14-minute podcast with the aerospace reporter from The Seattle Times, Dominic Gates, completed just before noon PDT today, immediately prior to the Boeing offer being posted. His insights are particularly noteworthy.
Update, 06:40 AM PDT, Aug. 29: Here are early news stories, with some IAM reaction to Boeing’s “best-and-final” offer.”
First, from the local Puget Sound area press:
Seattle Times: Early reaction negative.
Seatt Post-Intelligencer: A good piece with an overview of the situation.
The Everett Herald, also with a recap.
From national media:
Business Week: 787 cost overruns of $2bn may have influenced Boeing’s offer to IAM.
Bloomberg News: IAM reviewing offer line-by-line.
The IAM’s first reaction–posted at 2 in the morning August 29–may be found on the IAM website here. A full IAM recap and recommendation appears to be coming Saturday. A summary is expected late Friday (today).