September 27, 2005 in Business

Boeing, Machinists both win

Associated Press
 

Tentative contract

» Highlights of Boeing Co.’s proposed, three-year contract for about 18,400 members of the Machinists union who assemble commercial airplanes:

Wages: No general wage increase, but workers would receive a ratification bonus equivalent to 8 percent of wages or about $5,000 on average in the first year, plus $3,000 payouts in the second and third years of the contract.

Pension: Workers would receive pension payouts of $70 per month for every year worked, up from $60 currently.

Health care: Health insurance premiums would be unchanged from the current contract.

SEATTLE — A likely end to the strike at Boeing Co.’s commercial airplanes division could be one of those rare labor-management deals where both sides feel like winners.

“Not to say, ‘Hurray, we all win!’, but both sides can claim victory,” said analyst Richard Aboulafia with the Teal Group.

About 18,400 Machinists are scheduled to vote Thursday on a new three-year contract offer which, if approved, would allow Boeing to swiftly reopen its commercial airplane assembly facilities in the Puget Sound area, Gresham, Ore. and Wichita, Kan.

The new proposal gives workers a nearly 17 percent boost in pension payouts and guarantees retiree medical benefits for new hires. It also assures that health care premiums remain the same as the current contract, among other changes.

But it also calls for no general wage increase, instead opting for lump sum bonuses totaling about $11,000 over three years. And it takes away a previously offered provision that would have given workers pay incentives based on corporate financial performance.

Leaders of Machinists District Lodge 751 in Seattle say the deal is “a victory for working families across the country” that addresses the issues most important to its members, who average 49 years of age and currently make about $59,000 a year.

The company says the total cost is similar to its previous offer, and analysts say the resolution allows the company to quickly regain the momentum it needs to continue its heated battle with rival Airbus SAS.

“Call it a draw,” said analyst J.B. Groh with D.A. Davidson.

Investors appeared to welcome the tentative agreement, sending Boeing shares up $1.47, or 2.3 percent, to close at $64.67 Monday on the New York Stock Exchange. In the last 52 weeks, shares have traded between $48.10 and $68.38.

The new proposal comes just over three weeks after the Machinists walked off the job after union leadership deemed the company’s previous offer “insulting.” Both sides had insisted since then that they were miles apart and unsure when a happy medium could be reached.

But Aboulafia said the surprise announcement late Sunday that a proposal had been brokered could mean that the two weren’t nearly as far apart as public posturing would suggest. The revised offer also shows how important it appears to have been for both sides to get back to making airplanes.

Boeing is beginning to gain momentum in its commercial airplane business, which fell off drastically after the Sept. 11, 2001, terrorist attacks. But customers including All Nippon Airways Co. and Ryanair Holdings PLC had said the strike was delaying deliveries and affecting their route plans. Groh said it was unlikely that customers would cancel orders over the strike, but such delays could erode good will. Japan’s ANA is set to be the launch customer for the company’s new 787, for example, and the aerospace company is likely eager to keep that airline happy.

The fact that the union was able to get the contract it did — including no health care premium increases amid soaring health care costs nationwide — shows just how powerful the skilled Machinists are, even as other unions are losing clout. But Aboulafia said Machinists leadership may still have worried that being too tough in contract negotiations would lead to more outsourcing for future airplanes, such as the new 787.

“The one thing that gives (the union) that power is that outsourcing jobs takes a lot of time, but if you make life very difficult for the manufacturer these jobs are leaving,” Aboulafia said.

Mark Blondin, District Lodge 751 president, said fears about outsourcing didn’t play a role.

“We felt we were in a good position this time to hold a hard line on the issues, but we weren’t overreaching, either,” he said.

Still, analyst Chris Lozier with Morningstar was surprised the union didn’t hold out longer for an even better deal, especially after complaining bitterly about the company’s pension offer of $66 a month for each year worked.

© Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email