Showdown in Seattle: Boeing vs. Union

Thomas Lifson
A dramatic showdown is underway in the State of Washington, pitting Boeing against its largest labor union, the International Association of Machinists (IAM).  If the union, voting Wednesday,  rejects a proposed contract that includes lower health care benefits, Boeing is threatening to move production of its next generation airliner, the 777X, out of the Puget Sound region, to such locations as Charleston, SC (where it is assembling the new 787) or Texas, right-to-work states where the union's demands would hold no sway.

The Washington State Legislature takes Boeing's threats very seriously, indeed. Boeing has long complained about the tax burden Washington State imposed on it, on the theory that the company's dominance of the civil airliner business made it a golden goose whose eggs belonged in the coffers of the state as much as they belonged to the shareholders. But with the rise of Airbus Industrie, that dominance no longer can be taken for granted, and Boeing caused deep shock when it opened its plant in South Carolina.  Over the weekend, the State Senate and then the House passed a $9 billion tax break:

The Washington State Legislature overwhelmingly passed a measure on Saturday to extend nearly $9 billion in tax breaks forBoeing  through 2040 in an embattled effort to entice the company to locate production of its newest jet, the 777X, in the Seattle area. (snip)

The tax measure passed the Washington State Senate by a vote of 42 to 2 on Saturday, with the State House later approving it on a 75-to-11 vote.

Gov. Jay Inslee, a Democrat, said on Saturday that he planned to sign the measure this week.

Signs are mixed as to how the union will respond.  Jonathan Kaminsky of Reuters reports:

...at a raucous union meeting Thursday night, IAM President Tom Wroblewski tore up the proposed contract and called it "a piece of crap."

Hours later Boeing said it was ready to look for another location.

Protest against the proposed contract continued on Friday, as union members rallied in Boeing's Everett factory.

But at the union's website, the rhetoric is rather different:

IAM members at District 751 and District W-24 will vote on November 13, 2013 on a proposal from the Boeing Company that, if approved, would guarantee the Boeing 777X wings and fuselage will be built by IAM members in the Puget Sound.

In exchange for the 777X guarantee, Boeing proposes a new eight-year labor agreement that will expire in September 2024, providing an unprecedented degree of labor stability in the volatile and competitive industry.

"Securing the Boeing 777X for the Puget Sound means much more than job security for thousands of IAM members," said District 751 Directing Business Representative Tom Wroblewski. "It means decades of economic activity for the region and will anchor the next generation of wide-body aircraft production right here in its historic birthplace and will complement the 737MAX narrow body."

According to estimates, the 777X could mean as many as 10,000 direct and 10,000 indirect jobs in the immediate vicinity, with the project also serving as a long-term hub for advanced technology in electronics, avionics and composite technology required by the 777X.

The proposal by Boeing includes additional modifications to the current labor agreement, including cessation of pension accruals for current employees and the establishment of an alternative company-funded retirement plan. Additionally, within 30 days of ratification, all members would be paid a $10,000 signing bonus.

"Only a project as significant as the 777X and the jobs it will bring to this region warrants consideration of the terms contained in Boeing's proposal," said Wroblewski. "While not all will agree with the proposal's merits, we believe this is a debate and a decision that ultimately belongs to the members themselves."

If the union rejects the contract and Boeing moves the next generation assembly outside of Puget Sound, the union movement in the United States will suffer a major blow. The plain fact is that Seattle, buoyed by high tech and entrepreneurial ventures, has become a very expensive area in which to operate a large blue collar assembly operation that faces global competition. Beyong the back-and-forth of labor-management issues, the underlying economics have changed. Boeing was founded and flourished in Seattle because the original key raw material for airplanes was wood, and then later aluminum, both of which are in abundance in the Pacific Northwest. But today, composite materials are coming to the fore, and airplane assembly can be located almost anywhere.

A dramatic showdown is underway in the State of Washington, pitting Boeing against its largest labor union, the International Association of Machinists (IAM).  If the union, voting Wednesday,  rejects a proposed contract that includes lower health care benefits, Boeing is threatening to move production of its next generation airliner, the 777X, out of the Puget Sound region, to such locations as Charleston, SC (where it is assembling the new 787) or Texas, right-to-work states where the union's demands would hold no sway.

The Washington State Legislature takes Boeing's threats very seriously, indeed. Boeing has long complained about the tax burden Washington State imposed on it, on the theory that the company's dominance of the civil airliner business made it a golden goose whose eggs belonged in the coffers of the state as much as they belonged to the shareholders. But with the rise of Airbus Industrie, that dominance no longer can be taken for granted, and Boeing caused deep shock when it opened its plant in South Carolina.  Over the weekend, the State Senate and then the House passed a $9 billion tax break:

The Washington State Legislature overwhelmingly passed a measure on Saturday to extend nearly $9 billion in tax breaks forBoeing  through 2040 in an embattled effort to entice the company to locate production of its newest jet, the 777X, in the Seattle area. (snip)

The tax measure passed the Washington State Senate by a vote of 42 to 2 on Saturday, with the State House later approving it on a 75-to-11 vote.

Gov. Jay Inslee, a Democrat, said on Saturday that he planned to sign the measure this week.

Signs are mixed as to how the union will respond.  Jonathan Kaminsky of Reuters reports:

...at a raucous union meeting Thursday night, IAM President Tom Wroblewski tore up the proposed contract and called it "a piece of crap."

Hours later Boeing said it was ready to look for another location.

Protest against the proposed contract continued on Friday, as union members rallied in Boeing's Everett factory.

But at the union's website, the rhetoric is rather different:

IAM members at District 751 and District W-24 will vote on November 13, 2013 on a proposal from the Boeing Company that, if approved, would guarantee the Boeing 777X wings and fuselage will be built by IAM members in the Puget Sound.

In exchange for the 777X guarantee, Boeing proposes a new eight-year labor agreement that will expire in September 2024, providing an unprecedented degree of labor stability in the volatile and competitive industry.

"Securing the Boeing 777X for the Puget Sound means much more than job security for thousands of IAM members," said District 751 Directing Business Representative Tom Wroblewski. "It means decades of economic activity for the region and will anchor the next generation of wide-body aircraft production right here in its historic birthplace and will complement the 737MAX narrow body."

According to estimates, the 777X could mean as many as 10,000 direct and 10,000 indirect jobs in the immediate vicinity, with the project also serving as a long-term hub for advanced technology in electronics, avionics and composite technology required by the 777X.

The proposal by Boeing includes additional modifications to the current labor agreement, including cessation of pension accruals for current employees and the establishment of an alternative company-funded retirement plan. Additionally, within 30 days of ratification, all members would be paid a $10,000 signing bonus.

"Only a project as significant as the 777X and the jobs it will bring to this region warrants consideration of the terms contained in Boeing's proposal," said Wroblewski. "While not all will agree with the proposal's merits, we believe this is a debate and a decision that ultimately belongs to the members themselves."

If the union rejects the contract and Boeing moves the next generation assembly outside of Puget Sound, the union movement in the United States will suffer a major blow. The plain fact is that Seattle, buoyed by high tech and entrepreneurial ventures, has become a very expensive area in which to operate a large blue collar assembly operation that faces global competition. Beyong the back-and-forth of labor-management issues, the underlying economics have changed. Boeing was founded and flourished in Seattle because the original key raw material for airplanes was wood, and then later aluminum, both of which are in abundance in the Pacific Northwest. But today, composite materials are coming to the fore, and airplane assembly can be located almost anywhere.