Boeing, machinists begin contract talks

SEATTLE -- Boeing Co. and machinists union representatives met Friday to open contract talks, exchanging proposals on pay, pensions, health care and other issues.

Chicago-based Boeing's three-year contract with the International Association of Machinists and Aerospace Workers, which covers about 27,000 production workers, primarily in the Puget Sound area, expires Sept. 3.

Doug Kight, head of human resources and labor relations for Boeing's commercial airplanes unit, outlined some of the company's thinking in an interview with The Associated Press this week. One of Boeing's key worries is that its growing obligation to its fund employee pension plan could undercut its ability to maintain booming orders and a massive backlog.

"In a long-term business like Boeing, where you have long-term capital investment requirements to invest in your new products and the design of your next generation of airplanes, a market downturn that all of a sudden obligates you to spend billions and billions to fund your pension is a real challenge," Kight said. "We've got to have more stability and predictability so that we can have some assurance that we've got the resources there to invest in the product line."

Kight said Boeing will ask the union to consider replacing a defined benefit plan with a 401(k)-style plan for new hires. Currently, Machinist-represented workers have a 401(k) and a pension plan that vests after five years. Kight estimated Boeing's pension liability is $46 billion.

He said the "enhanced" 401(k), into which Boeing would contribute a lump sum based on the worker's wages, would pay a monthly amount similar to the existing pension plan plus the regular 401(k).

Such moves have become more common in recent years. Last fall the United Auto Workers agreed to similar contract changes with Ford Motor Co. and General Motors Inc.

The proposal, which the union opposes, is also designed to make Boeing more attractive with a younger generation of workers who may not stay at the plane maker for five years and want a retirement plan that's portable and vests immediately, Kight said.

The Machinists union represents a wide swath of Boeing's hourly workers, from workers who make parts and assembly mechanics to airplane painters, quality assurance inspectors and even registered nurses. Including cost-of-living adjustments, they make an average of about $58,000 annually before overtime.