Boeing begins final contract talks with largest union
Boeing Co. begins the final push of contract talks with its largest union today amid pressure to avert a strike that would cause further delays in the planemaker's 787 Dreamliner program.
Bank of America Securities analyst Harry Nourse sets odds of a strike at 70 percent, while Alex Hamilton of Jesup & Lamont Securities puts the chance at 60 percent. Boeing's contract with 27,000 workers represented by the International Association of Machinists expires Sept. 3.
The union says Boeing's $10.7 billion in profits since 2004 justify demands for better pay and benefits, and Boeing's fortunes have improved since the start of talks in May. The 787 is meeting a revised production schedule, the Pentagon gave Boeing a second chance at a $35 billion tanker contract, and fuel prices that have crippled airline customers have dropped more than 25 percent in a month.
``If we can't make any gains in the good times, then when would we ever have the leverage to do that?'' Thomas Wroblewski, president of Seattle's IAM District 751, said in an interview.
The sides began talks May 9 with committees meeting three times a week on non-economic matters. Starting tonight they cloister themselves into a SeaTac, Washington, hotel to try to work out financial terms before the contract expires.
Boeing and the union already have made ``significant progress,'' spokesman Tim Healy said. Union spokeswoman Connie Kelliher said only ``minor'' issues such as layoff-recall rights have been resolved. The machinists covered by the contract -- in Washington, Oregon and Kansas -- make up about 17 percent of Boeing's 159,300 workers. The Seattle workers made an average of $27 an hour, or about $56,000 a year, as of August 2007.
In addition to delaying the 787, a strike might keep Boeing from reclaiming the position of world's largest planemaker from Airbus SAS, the Toulouse, France-based rival that's built more planes annually since 2003.
Shares of Chicago-based Boeing are trading near a four-year low and have dropped 38 percent since the first of three 787 delays was announced in October. Boeing declined 46 cents to $62.75 at 9:44 a.m. in New York Stock Exchange composite trading.
Boeing is counting on the fuel-efficient Dreamliner, which is made of lightweight composites, to attract airlines battling record oil prices that have forced some carriers to ground gas- guzzling aircraft. Boeing has orders for almost 900 planes.
The union would reason ``that Boeing cannot afford a protracted walkout further delaying the 787 and so will be more likely to accede to the workers' demands,'' New York-based analyst Nourse wrote July 31. Hamilton, also based in New York, wrote on Aug. 14 that a work stoppage ``would more than likely hamper Boeing's 787 first flight schedule.''
Boeing has set the first test flight for November and delivery for next year's third quarter, at least 14 months late because of parts shortages and a new assembly process.
The union pulled burn barrels, used to keep workers warm on picket lines, from storage last week and has trained picket captains, Kelliher said. Machinists marched through Boeing's Seattle-area plants every Wednesday for the past month, wearing blue T-shirts saying ``It's Our Time This Time.''
The machinists have gone on strike six times since the union was founded in 1935. The last one, a 28-day walkout in September 2005, kept Boeing from building 30 planes. The strikes shaved about $300 million from earnings combined for the third and fourth quarters of 2005, based on per-share figures Boeing gave in its earnings reports.
The planemaker had $10.2 billion in cash and marketable securities as of June 30, giving it some cushion to tolerate a strike. Boeing has a record order backlog that will keep it busy building planes for the next eight years.
The union is seeking improvements in all aspects of the contract, with better health care and higher wages and pensions for the workers who are covered in the Seattle area, as well as Portland, Oregon, and Wichita, Kansas. The typical Seattle-area machinist starts with a pay range of $12.72 to $28.22 an hour.
Machinists have been ``infuriated'' by what Boeing has proposed so far, with offers including a $1.28 an hour increase in starting wages and swapping a pension program for a 401(k) plan for new employees, Wroblewski said. The union has said it wants the same salary increase for current workers that it's won elsewhere in the aerospace industry, or 9 percent to 13 percent spread out over three years.
Vendors are also preparing for a potential walkout. In a departure from its traditional manufacturing method, Boeing is relying more on other companies to help build the Dreamliner. Partners in the U.S., Italy and Japan are putting together sections of the plane and shipping them to Boeing's Everett, Washington, plant for final assembly.
``We do have a plan,'' said Clay Jones, chief executive officer of Cedar Rapids, Iowa-based Rockwell Collins Inc., which makes cockpit instruments and communication and surveillance systems for the Dreamliner.
If machinists walk out, he expects Boeing ``to do what they did last time, which is to tell us to continue to ship products,'' Jones said in an Aug. 7 interview.