Machinists' Walkout Likely to Paralyze Crucial Operations
By Michael A. Fletcher
Washington Post Staff Writer
Saturday, September 6, 2008
More than 27,000 Boeing assembly workers were poised to walk off the job this morning, after last-ditch talks between the giant aircraft manufacturer and union negotiators broke down over disagreements about wages, pensions and job security.
Members of the International Association of Machinists and Aerospace Workers were prepared to strike just after 3 a.m. EST, a move that could paralyze Boeing's manufacturing plants as the company is experiencing record profits and working on what the union says is a seven-year backlog of orders.
Angry union negotiators called the strike last night after talks aided by a federal mediator failed to produce an agreement. Union members had voted overwhelmingly to strike Wednesday night but grudgingly agreed to a 48-hour contract extension to try to reach a deal.
Most of the workers affected are based at plants in the Seattle area; others work in Gresham, Ore., and in Wichita, Kan.
"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," Tom Wroblewski, the union's district president, said in a message to members.
A Boeing spokesman confirmed the end of negotiations, saying, "Efforts with the mediator are over."
The strike marks a critical test for organized labor, which has struggled to make gains as competition for labor has expanded across the world, diminishing workers' leverage. But the Boeing electricians, riveters, painters and others are in an unusually strong position because they are skilled laborers working for a company that has been highly profitable in recent years.
"This is a case where a union does have significant leverage," said Robert A. Bruno, an associate professor of labor and employment relations at the University of Illinois at Chicago. "The employer is very profitable and has the capacity to pay. And they are in a critical industry that you cannot afford to not have functioning."
Boeing officials said their three-year contract offer, which included an 11 percent wage increase and a 3 percent cost of living increase, plus potential bonuses, was generous for workers who earn an average of $56,000 a year before overtime.
The union, however, had pressed for more, including a commitment to limit the use of outside contractors. The union also said the company's proposal was riddled with givebacks -- on pensions and the cost of health insurance, for instance -- which infuriated workers who expected more from a company that reported more than $900 million in profit in the last quarter.
"There is a lot of resentment," union spokeswoman Connie Kelliher said. "Workers do not understand why there should be any takeaways when the company is enjoying good times."
Analysts said a prolonged strike would erode the profitability of Boeing's commercial aviation division, which has been booming with a record $275 billion backlog of orders. Scott Hamilton, who operates Leeham Co., an aviation consulting firm based in Issaquah, Wash., estimated that a strike could cost Boeing $2.85 billion in deferred revenue and $259 million in earnings per month.
Much of the aviation world will be watching how the strike affects the company's new 787 midsize commercial jet, known as the Dreamliner. The plane, which is in final developmental stages, largely was designed for fuel efficiency. The hot seller has lightweight components that allow it to burn 20 percent less fuel than comparable-sized airliners. Boeing said it has 895 orders for the plane.
The Dreamliner program has faced a series of delays, putting it at least a year and a half behind schedule. Boeing's production plan is a big source frustration for the union. The company farmed out large parts of the plane's design and construction work to vendors, including companies outside the United States and others with workers in Southern states where unions are weak. Some of that work has come back with problems, contributing to delays.
Boeing sees the ability to outsource as key to improving efficiency and expanding its business. The firm says 90 percent of its back orders are from outside the United States and it has to remain competitive globally. "We believe that the only job security comes from selling airplanes and having happy customers," Boeing spokesman Chris Villiers said.
A long strike by Boeing employees could impact the nation's economy and slow recent export growth. Exports have been among the few bright spots in the economy, and the sale of aircraft and their parts has helped drive that growth. A long strike would also hurt firms that make engines, parts and aircraft components used by Boeing.
"Any slowdown in Boeing's production of aircraft will ripple through their supplier network and create problems for workers who make engines, structures, instruments and other parts," said Loren Thompson, a consultant at the Lexington Institute in Arlington.
That supply network is wide: Pratt & Whitney in Hartford, Conn., and GE both make engines for Boeing planes. Rockwell Collins, which is based in Cedar Rapids, Iowa, makes electronics for Boeing. Mitsubishi makes parts. Goodrich in Charlotte, N.C., makes landing gear and brakes. And Honeywell makes drive systems and avionics.
"The pain is felt in just about 50 states," said Richard Aboulafia, a vice president and aerospace industry analyst at the Teal Group in Fairfax. He said that about 70 percent of an aircraft's value is outsourced in some way. "What you're seeing at Boeing is the tip of the iceberg in terms of the financial, industrial and employment pain. . . . The first couple of weeks people can ride things out, but beyond that the pain starts to hit numerous homes."
Staff writers Sholnn Freeman, Dana Hedgpeth and researcher Julie Tate contributed to this report.
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