As the Boeing strike enters Week 2, we continue our “media watch” for continuing coverage.
Seattle Post-Intelligencer: BCA President Scott Carson hopes talks will resume in a “couple of weeks” and a settlement will come shortly thereafter. The P-I’s James Wallace also has a Q&A with Carson.
Reuters: Boeing’s CEO gambles on strike.
Forbes: Analyst predicts additional 3-6 mo 787 delay before the strike. The headline of the story is about the strike lowering demand for titanium. Yeah, fine. What caught our eye is the additional delay in the program. Boeing CFO James Bell told a Morgan Stanley conference the program delay should be one day-for-one day. Which means either others are looking for a long strike (we only hear 4-6 weeks and Bell would be happy with only a month) or there are deeper issues in the 787 program.
Business Week: This magazine predicts a two month strike.
Seattle Post-Intelligencer: Obama rips McCain on outsourcing.
Seattle Post-Intelligencer: Boeing’s Carson confident of settlement.
Marketwatch: IAM strike may be hurting themselves. This is a good analysis with a good illutration of where parts of the 787 are built.
Aviation Week: This is a good summary of the stand-off between IAM and Boeing.
The Boeing Chief Financial Officer spoke to the Morgan Stanley conference September 10. James Bell is the presenter. Highlights as the presentation proceeds:
(Unless there are quotation marks indicating a direct quote, Bell’s comments are paraphrased as we took notes in real time during the presentation.)
Update, Sept. 12:
Chicago Tribune: Obama slams McCain for ties to EADS, tanker controversy. It was bound to happen: the tanker is now fully caught up in presidential politics.
Mobile Press-Register: McCain ‘just doesn’t get it,’ claims Obama.
DOD Buzz: Direct sale of KC-30 to USAF pondered. Military.com’s blog reports some Northrop supports are trying to figure a way to offer to sell 20 KC-30s to the Air Force on a “commercial deal” that would by-pass the ordinary procurement process. Separately, we learned from two sources that US cargo airline Atlas Air considered a plan to buy the winning tanker and provide fueling services to the USAF.
Update, Sept. 11:
DOD Buzz: IAG does a 16 minute podcast with DOD Buzz, relating a conversation with US Rep. Norm Dicks (D-Boeing) about a possible split buy on the tanker (right at the top of the podcast); and the possibility that Northrop might offer a commercial deal to sell 20 KC-30s to the USAF (about 11:45 minutes).
Steve Trimble at Flight International has one of his as-usual insightful blog items.
Politico: Tanker delay may help McCain.
The Motley Fool takes a whimsical look at the tanker debacle.
Update, 7:00 PM Sept. 10:
Business Week reports that EADS is pondering a legal challenge to the DOD decision to cancel the competition.
CNN/Dow Jones: EADS howls over contract cancellation.
AFP (Europe): Politics charged in cancellation.
Seattle Times: Timeline in tanker saga.
The Wall Street Journal reports the Department of Defense has canceled the competition for the KC-X tanker. The report:
The Pentagon cancels tanker competition, saying it’s impossible to pick a winner by January. The Department of Defense is expected to notify Congress and the companies today. Full article to follow.
Wall Street Journal: Here is the full article, but paid subscription may be required.
This is another stunning twist in the tanker saga. More news to come.
DOD Buzz has this piece.
Our take: We agreed with Boeing that six months was reasonable to do the re-bid, but we don’t know why the analysis could not have transcended administrations. Although the top leadership at the Pentagon might change (even though there has been plenty of speculation that DOD Secretary could stay on, no matter whether McCain or Obama is elected), presumably the evaluators would not change–only the deciders. This development is not good news.
Update, 9:15 AM PDT: Boeing CFO James Bell told a Morgan Stanley conference that the DOD has canceled the procurement and an entirely new Request for Proposal process will begin. This is an important distinction from postponing the competition. See the last bullet point of our post of Bell’s presentation.
Update, 10:45 AM PDT: Here is the statement by Defense Secretary Robert Gates:
Airbus has hit the news this week with a series of stories about jobs and cost-cutting.
International Herald Tribune: No job cuts, just more US$ purchases.
Reuters: From Tunisia, with love.
Business Week: Airbus seeks new cost cuts.
Forbes: Airbus aided by strong dollar.
Flight International: Airbus to offer A330HGW to take advantage of 787 delays.
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.
First it was mid-August, then late August and now it’s supposed to be this week. Pardon our skepticism if the US Department of Defense slips yet again on issuing the Final RFP for KC-X program.
We’ll update this column this week as necessary as we all wait for the tanker RFP.
Update, Tuesday, Sept. 9:
Update, 1:00 PM PDT: Defense News: Tanker statement may come Wednesday.
From earlier today:
Reuters: DOD brass to meet, make statement.
Flight International: Citing engine test problems, the A400M program looks for yet another delay.
Update, Sunday, Sept. 7:
Defense News: Italian KC-767 delivery slips to 2009, four years late.
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.
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.
“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.”
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.
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.
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.