Ongoing Boeing Strike Poses Threat to Industry

If ever there was a company built to withstand the global financial crisis, Boeing might be it. The aerospace and defense giant is well diversified. The world's airlines are lining up with orders for the company's latest commercial jets.

But Boeing's prospects appear cloudy as a machinist strike enters its seventh week. Analysts say the strike, if not resolved soon, could make it difficult for the world's largest aircraft manufacturer to weather the recession, weakening a giant of industrial America.

Last week, the Federal Reserve said the Boeing strike contributed to the 2.8 percent decrease in industrial production in September, the steepest drop in 34 years. Crunching the figures, economists estimate the strike could be shaving as much as one-tenth of a percentage point from the nation's gross domestic product. Already, the strike, launched in early September by the International Association of Machinists and Aerospace Workers, is affecting thousands of U.S. workers whose jobs are tied to Boeing's production lines.

"My sense is that the impact is going to be much deeper than currently perceived," said Wolfgang Demisch, a veteran industry consultant. "The world's airlines are on a buying spree. All of this essentially relies on sustained global peace and prosperity. It also relies on the global availability of relatively inexpensive credit."

Analysts estimate that Boeing has a six- or seven-year backlog of plane orders. The company's newest model, the 787 or so-called Dreamliner, is the darling of the aviation world. American Airlines this week said it agreed to order as many as 100 new 787s over the next decade, which have a list price of $150 million to $200 million. But Boeing's factories are shut down now due to the strike, and they aren't producing any new airplanes.

Boeing is offering to boost salaries in current negotiations, but the company and the union have been unable to agree on outsourcing. The union wants to change contract provisions that allow Boeing to use outside companies to deliver parts inside plants.

"It's a slippery slope," said Connie Kelliher, an IAM spokeswoman. "If you allow employees from another company to do work that you've traditionally done, people who bring in the engines will be asked to hang the engines."

So far, it appears that both sides are digging in. Bargainers met last Sunday and Monday and adjourned without a new agreement. As of late yesterday, no talks were scheduled for this weekend. Analysts say the union has the upper hand as long as Boeing's order books remain filled.

Boeing spokesman Jim Proulx said that the company wants its employees back at work but that in these tough economic times, Boeing could not "lock ourselves into any agreement that wouldn't allow us to conduct our business in the most efficient manner possible."

About 27,000 IAM workers at Boeing are on strike. But the shutdown is affecting thousands of workers outside Boeing. In Wichita, Ernest Gonzales, a 52-year-old single father of two, works at Spirit AeroSystems, a Boeing contractor. Because of the strike, Gonzales and other workers have had their work schedules cut to three days a week.

On Thursday, Gonzales joined other workers affected by the strike at a pro-union rally outside an IAM union lodge. Workers were being handed $25 and $50 food vouchers. At Spirit headquarters, workers say Boeing parts are piling up. Finished fuselages sit on railcars waiting for delivery to Boeing's shuttered Pacific Northwest assembly hangars.

Gonzales said Spirit workers are using sick days, vacation time and unemployment insurance to fill the gaps and assemble regular 40-hour paychecks. Jeff Turner, Spirit's president and chief executive, sent out a memo Wednesday telling 10,500 workers that the company was preparing for an extended strike. A work stoppage beyond October could lead to broad shutdowns and temporary layoffs as early as mid-November, he wrote.

"We have to deal with that," Gonzales said. "There's concern about holiday pay and what type of Christmas we are going to have because most of us would be laid off out here."

Demisch, the aerospace analyst, called the strike a "tragedy" that reflects years of poor labor relations at Boeing. He said if Boeing's labor situation doesn't improve, the American aerospace industry could go the way of the auto industry, with management and labor at loggerheads.

"It seems there is no learning taking place," Demisch said.