September 01, 2008
Boeing Machinists: Penny Wise & Pound Foolish

It seems clear from the decision of the Machinists Union leadership to support a strike against Boeing that they have learned nothing of the lessons of how the modern economy has evolved in the last quarter century. In the next quarter century they'll likely have the declining jobs for their members to prove it.

Boeing's "best and final offer" [pdf] includes an 11% pay raise and a 14% increase in pensions. It also includes a lump sum bonus of at least $2,500, plus the continuation of almost unheard of $0 premium health plan options. Meanwhile, Boeing gave in on initial proposals to phase out retiree health care and traditional pensions - though those issues remain serious concerns for a company trying to avoid crippling legacy costs.

Clearly, Boeing doesn't want to see a strike given the volume of cash being thrown at the Machinists and the number of other concessions the company has made. Nevertheless, the union says the deal isn't rich enough, including ongoing rank-and-file complaints about a lack of "job security."

Sadly, no one seems to have told the union and its members that the era of a single job with one corporation for life is well nigh over. More importantly, it is obvious the lessons of the domestic auto, airline, and steel industries have been utterly missed by these guys.

That being: contracts that break the company's back with excessive long-term costs do not payoff for union members. The implications of Boeing being forced to cave to avoid a strike, which would brutal to tolerate in the face of existing 787 delays, are already raising eyebrows:

"A short strike will be relatively inconsequential. ... By the time we get to 2009, we'll forget about it," said Wall Street analyst Joe Campbell, of Lehman Brothers. "A longer strike will have more material consequences, particularly for the 787. And it will make Boeing continue to think about alternatives to the Seattle work force." [emphasis added]

[snip]

And what of the risk that striking the company to force a bigger increase in compensation would encourage Boeing to send more work away?

"In the long run, it makes [Washington state] a bit less competitive," Teal Group analyst Richard Aboulafia said. "The only parts of the country where aerospace is growing are 'right-to-work' states down South," where unions are weak.

Right now Boeing is obviously hoping that the Machinists won't garner the 2/3 vote necessary from their members to authorize a strike. But in the long term, one can already see the writing on the wall for Boeing's long-term reliance on partners rather than internal workforces...which are not guaranteed by any stretch to remain in the Evergreen State at any rate.

At some point you would think the Machinists might want to consider that fact.

Posted by Eric Earling at September 01, 2008 07:42 PM | Email This
Comments
1. I'm getting a little tired of seeing machinists turn their noses up at a good offer, then see the engineers accepting an offer not nearly as good. So much for college...

Posted by: scott on September 1, 2008 07:55 PM
2. That's far more than any public employee will see in the next few years. Some of my friends who are state employees had less on their checks after the "pay raise" called "generous" by most here.

Posted by: Handy Randy on September 1, 2008 07:56 PM
3. The machinists union is a corrupt, vile organization that, as you so aptly state, is out-of-touch with what has happened in other industries when unions ask for too much. Why don't you try making do with what you have. If you don't like it, FIND ANOTHER JOB, like the rest of us have to do!!!!

Posted by: Michael on September 1, 2008 08:00 PM
4. They should not strike...look how lucky they are...good stable jobs in an economic environment not seen since the great depression. While companies across the country are laying off by the hundreds of thousands, they are employed enjoying good benefits, etc. I have always hated unions in this day in age. If they are unhappy with the benefits, they should quit and find a company that will give them more (yeah right!). The IAM leadership is greedy and corrupt, and if they keep giving Boeing a hard time, then Boeing can easily go to the southeast or Texas. Even in Long Beach, CA, the UAW had more common sense to approve their contract a few months ago.

Posted by: Mike on September 1, 2008 08:43 PM
5. I have to side with Labor here (as some of you know, I think of Labor as a business -- the selling of skills, and think they'd make good Republicans as well).

The Puget Sound is the expensive area in the country to live. Houses are still TWICE the median. Our inflation rate is TWICE the national average.

They need to get every cent to make it at all worthwhile.

An alternative is to move Boeing commercial out of Puget Sound entirely -- which is also a good idea...just go to the way of the corporate headquarters. This would free up much needed land for other development.

Posted by: John Bailo on September 1, 2008 09:24 PM
6. Speaking of strikes, the Bellevue teachers' strike is the reason it is illegal for public employees to strike. There is no downside for the union members. They get paid for every day missed, their jobs can't be outsourced, the taxpayer is on the hook for every penny.

The union says there is no budget problem in Bellevue, regardless of what the district says. They contend that their raises can be paid out of the extra revenue that will be raised in the next three years from higher property taxes. I am now convinced that teachers all failed math, and aren't really all that smart. How else would this reasoning fly with them?

Has anyone noticed there is a real estate problem these days? But that doesn't matter to teachers. Money comes out of a magic pot. And as long as they get theirs, it doesn't matter if everyone else loses hours and jobs.

Posted by: janet s on September 1, 2008 09:34 PM
7. While the health insurance is $0 premium, the ever increasing deductible actually makes it more expensive than that of my previous employer.

Posted by: Vatar on September 1, 2008 10:55 PM
8. Oh come on John Bailo - you know it as well that the union here is trying to break the company for every cent it has and it's wrong. I am not against unions but when a union attempts to break a company - BS on on them. I do hope this - give the union what they want - then within 2 years time (or less) lay off 10 to 15% of those union memebers. That will teach them! If the revenue decreases which it will if those union members get what they want - Boeing reserves the right to LAY OFF !

Posted by: Darren on September 1, 2008 11:39 PM
9. Job security?? NO ONE has job security. Boeing has no guarantee that airlines will continue to buy its planes in the future. These people need to get out more and maybe start their own businesses to see what total lack of security business owners have. Clue: None.

Posted by: Michele on September 1, 2008 11:56 PM
10. The machinists are acting in their own best interests. They can see that Boeing built the Dream Lifter to make it possible to manufacture their planes in foreign countries. They all know that it is not a matter of if but when Boeing will close down all Seattle manufacturing and lay off all the machinists. They're now just trying to get the biggest cut they can while it lasts.

Don't get angry, just wait until you see them working at Walmart, then snicker and point. Public ridicule is a vastly underutilized method of revenge.

Posted by: blindman on September 2, 2008 12:42 AM
11. To the rest of the nation who has never worked at Boeing. After years of drilling, riveting, twisting, wrestling tools and backbreaking 12 hour days putting airframes together, your body starts to feel it. This is not easy work. WE NEED the medical benefits to repair ourselves. This is not a selfish act. If we don't fight now, we will have to fight later. Remember the saying, "Fight this war so our children won't have to" Be strong union!

Posted by: Justice on September 2, 2008 12:45 AM
12. Blindman, you fool you must work at Walmart. Sucks don't it. Being exploited at every turn. Your basic needs aren't even being met. Walmart would get rid of you with no hesitation, same as Boeing. They have no loyalty to the employees, so we need an advocate for the worker.

Posted by: Justice on September 2, 2008 05:04 AM
13. once they move out, the members won't have to worry about physical pain anymore.

Welcome to the real world on health ins.

HSAs for all.............

Posted by: Sandy P on September 2, 2008 07:13 AM
14. Janet @ 6:

I agree the biggest problem with teachers unions is the way they have parents over a barrel when it comes to strikes. I would like to see the teachers' contracts expire at the END of the school year, so they can't be paid over the summer. That would motivate them to negotiate.

I'm in North Bend, where thankfully the teachers didn't strike, but they talked about it. The teachers say they should be paid on par with other Eastside districts. However, in North Bend, teachers can actually afford to live in the districts they teach in. There is still affordable housing. So why should those of us who make the long commute to work in the real world give up more of the money we earn to appease the powerful teachers unions?

Teachers know what the salaries are when they decide to teach, live with it, find a different higher paying district, or find a career with better earning potential.

Posted by: Dan on September 2, 2008 09:16 AM
15. Justice - Do you consider yourself at "war" with Boeing? Your post sounds as if you feel Boeing machinists are the only people in the region that actually work, as well. I'm sure after you force Boeing out of the state, you'll learn otherwise.

Posted by: Disbelief on September 2, 2008 09:21 AM
16. We all know what happens when unions start dictating to companies, just like Airbus who have the absolute worst unions in the world..


Where are they building planes now " CHINA "and if Northrup Grumman is successfull in winning the Tanker contract they will build them in Mobile Alabama not California.

Give your head a shake guys, things are pretty good considering the economy, striking anytime is never productive, what little extra you might get will never offset what you will lose in striking.

Posted by: Larry the cable guy on September 2, 2008 09:34 AM
17. Fire them all. Yesterday.

I guarantee you there won't be any shortage of people willing to step in and take that awful, awful package offered by Boeing.

Seriously. Take a page from Reagan's book and can 'em.

Posted by: jimg on September 2, 2008 09:35 AM
18. I don't live in Washington, but I had a long work tenure in the manufacturing business.

Our company was the world leader back when I was a pup and thru a series of turns, our business went south. Some of it was union related, some were less than visionary management decisions however, the emerging international competition we faced was the force that eventually did us in. It took several years but they caught up to us.

In a few years the Chinese, Japanese, Russians and even the Brazilians will be building the large jets and Boeing won't just be facing the French and their 30 hour work week.

Yes, Boeing Corporate moved to Chicago for various reasons including geographical, but my guess is Alabama and Tennessee are looking mighty good about now. If you think corporate hasn't discussed moving some of it's manufacturing out of Washington....your as naive as my former company in the 1960's.

At the very least should Boeing stays put, you are seeing the last of bidding against only (1) competitor. Those days are coming to an end.

Posted by: LOOKING IN on September 2, 2008 09:51 AM
19. I would have to say this episode changes my long term view of boeing. With airbus likely building a factory in the Southeast, the competitive advantage in terms of costs will swing in their favor. Additionally, the union strike and its further delaying of the dreamliner will impede boeing orders in the future. Boeing should have moved the plant when they had the chance.

Posted by: John Heithaus on September 2, 2008 09:58 AM
20. Here's a letter I sent to my SPEEA rep. who asked me to support the IAM.

Well, I wish the company would offer ME that contract! I'd vote for it in a heartbeat. Job security is not a given, never has been. Look at what has happened to Ford, where they have people sitting around reading magazines collecting a paycheck because the union insisted on job security. Now Ford and GM are on the brink of bankruptcy and laying off more people and closing plants because of it. If Detroit is an example of strong union contracts, I'll pass. The place is a ghost town now.
If Boeing can't get a union contract that makes them money, they have and will continue to offload the work. We don't' have a corner on the labor market for airplane design and fabrication. Boeing can just as easily build them in Alabama like Airbus wants to do. There has to be a balance between union demands and killing the golden goose. This is a good offer, one that demonstrates the Company really doesn't want a strike. If IAM members reject it, the Company will dig in it's heels for a long strike and the union will be made to suffer and they'll never get that money back. We get too crazy with this stuff and we'll all eventually be OUT of a job and "Ivan" or "Ahmed" will be doing most of our engineering work and "Billy Bob" will be doing the assembly.

Please pass this on to SPEEA leadership.
Thanks,

Posted by: Scott on September 2, 2008 10:09 AM
21. Every time I see one of these union idiots talking on TV and realize they are the ones building the airplanes that I sit in at 550 MPH and 34,000 feet, it scares the crap out of me.

Posted by: Huey on September 2, 2008 11:37 AM
22. An employee's medical doesn't come into effect when the injury is caused by work. LNI does. Company is already paying for that to the state. And yes, hearing loss, diseases and other conditions caused by constant wear and tear on the body over a long period of time (lifetime) qualifies.

Posted by: Shannon C on September 2, 2008 12:26 PM
23. #21 says: "Every time I see one of these union idiots talking on TV and realize they are the ones building the airplanes that I sit in at 550 MPH and 34,000 feet, it scares the crap out of me."

That's why we over-engineer these things by 50%!

Posted by: scott on September 2, 2008 01:04 PM
24. @12

No union can force a company to stay in business. No union can force a company to keep jobs for all union members. No union can force a company to pay exorbitantly high wages without consequence.

No, I do not work at Walmart. I started with nothing, worked my way through school, busted my ass and now I run a software engineering department (not at Boeing).

I'm proud to say I've never been a union member. I don't need an advocate, I am my own best advocate.

Posted by: blindman on September 2, 2008 02:36 PM
25. @22

Shannon, it's called L & I, it's an acronym for the Department of Labor and Industries.

Posted by: blindman on September 2, 2008 02:37 PM
26. As a Seattle native now thankfully residing in SW WA, as a former Boeing employee and son of a longtime local 751 member, my thoughts are mixed about Boeing's relationship with Washington State and the union.

-union greed long ago started to remove tens of thousands of Boeing jobs from the region, and this will accelerate given the stubborn and ongoing shortsightness of the union and it's members.

-our inability to deal in an adult fashion with transportation issues adds to fuel, ooh-bad pun, the above scaling down of Boeing activity in this state.

-in light of the fact State Gov't cannot control itself from a tax/spending standpoint, and, cannot seem to implement realistic transportation policies, maybe the only way to get more general purpose lane capacity is to drive out a large employer....

Pretty bright strategy, union and Olympia dudes and dudettes....

Pathetic....

Posted by: Hank on September 2, 2008 02:49 PM
27. ya, know an 11% increase over the life of the contact doesn't even keep up with inflation.

Posted by: Bill on September 2, 2008 04:18 PM
28. @25 Labor and Industries uses LNI as an acronym (e.g. www.lni.wa.gov)

Posted by: no one on September 2, 2008 04:32 PM
29. This report is completely one sided only showing the "increases" that Boeing wants you to see. They aren't saying that the cost of the "$0" health care got raised by 2000k per year in out of pocket expenses as well as the deductible went up to 450per person in a family of 3. They aren't talking about the decrease in prescriptions coverage adding significant costs to employees with maintenance drugs required. They are also not mentioning that they have made spouses ineligible to collect survivors benefits if they qualify for Social Security. Benefits that we all work for and pay into. You morons are so tired of us turning our noses up at a "good contract"? I guarantee we wouldn't get good contract proposals without our Union and by the way at Boeing people work there 1 job for life. This is one of the only places that this still holds true but it does. It is one huge double standard to call IAM leadership greedy when the Boeing Co. is coming off of $13billion in profits which is a record and then they turn right around and offer the machinists who helped them a contract riven with take-backs. Machinists would be stupid not to strike.

Posted by: Berb on September 3, 2008 02:24 PM
30. This report is completely one sided only showing the "increases" that Boeing wants you to see. They aren't saying that the cost of the "$0" health care got raised by 2000k per year in out of pocket expenses as well as the deductible went up to 450per person in a family of 3. They aren't talking about the decrease in prescriptions coverage adding significant costs to employees with maintenance drugs required. They are also not mentioning that they have made spouses ineligible to collect survivors benefits if they qualify for Social Security. Benefits that we all work for and pay into. You morons are so tired of us turning our noses up at a "good contract"? I guarantee we wouldn't get good contract proposals without our Union and by the way at Boeing people work there 1 job for life. This is one of the only places that this still holds true but it does. It is one huge double standard to call IAM leadership greedy when the Boeing Co. is coming off of $13billion in profits which is a record and then they turn right around and offer the machinists who helped them a contract riven with take-backs. Machinists would be stupid not to strike.

Posted by: Berb on September 3, 2008 02:24 PM
31. This report is completely one sided only showing the "increases" that Boeing wants you to see. They aren't saying that the cost of the "$0" health care got raised by 2000k per year in out of pocket expenses as well as the deductible went up to 450per person in a family of 3. They aren't talking about the decrease in prescriptions coverage adding significant costs to employees with maintenance drugs required. They are also not mentioning that they have made spouses ineligible to collect survivors benefits if they qualify for Social Security. Benefits that we all work for and pay into. You morons are so tired of us turning our noses up at a "good contract"? I guarantee we wouldn't get good contract proposals without our Union and by the way at Boeing people work there 1 job for life. This is one of the only places that this still holds true but it does. It is one huge double standard to call IAM leadership greedy when the Boeing Co. is coming off of $13billion in profits which is a record and then they turn right around and offer the machinists who helped them a contract riven with take-backs. Machinists would be stupid not to strike.

Posted by: Berb on September 3, 2008 02:24 PM
32. anjm rwxbk gtpdoleuw edbu ipem fpiuy ysck

Posted by: tvzkwr zbclg on September 4, 2008 06:17 AM
33. what is wrong with you people?.i dont know if your job pays as well as mine.but whos side are you on? the side of the people or the side of the big (rich) corporate leaders.the boeing companty will not go broke by leaving our medical plan alone...they want to nickel and dime us until our benifits are gone!.and they want no retirement benifits for future new hires.wake up! the power should be to the people not the super rich faggots that want to reduce our standard of living.good pay trickles down to you ..........

Posted by: donnie on September 5, 2008 06:19 PM
34. Its call "1 job for life" - because the workers do not have the required skills to find another job. Welcome to the real world of having healthcare costs - how is the auto industry workers (specifically the UAW) working out with that $0 cost healthcare?? I would suck it up, and take the new $99k tag price that you were offered. This is perfect timing for Boeing to continue outsourcing - which I sincerely hopes it does. Unions = Overpaid whiners.

Posted by: Chad on September 6, 2008 06:29 AM
Post a comment
Name:


Email Address:


URL:


Comments:


Remember info?