Boeing nonunion workers face costs spurned by labor
Boeing Co.'s 100,000 nonunion workers will pay more for their health care starting next year as the world's largest aerospace company tries to find savings that were rejected by labor groups.
Employees' share of medical costs will rise from 11 percent, according to briefing documents reviewed by Bloomberg of a presentation to managers. While an amount hasn't been set, it probably won't be as much as the 30 percent average at peer companies, said Karen Forte, a spokeswoman.
"We're definitely asking employees to step up and pitch in a little more," Forte said yesterday in an interview. "We're still working through what those changes look like, but it's not in Boeing culture to make such a huge change overnight."
Boeing's efforts to pass on more costs were among the triggers for a two-month strike by 27,000 Machinists union members in 2008. The final agreement with the labor group, Boeing's biggest, didn't include the increases the company had sought as medical inflation outstrips rising consumer prices.
Negotiators with Chicago-based Boeing will try again during contract talks with Machinists and engineers in 2012, Forte said.
"Competitive pressures within the business" and "additional cost pressures" expected in 2018 under the U.S. health-care overhaul are driving the latest changes, according to the briefing documents.
Medical Inflation
Insurance premiums for family coverage rose 131 percent to $13,375 from 1999 through 2009, the Kaiser Family Foundation said last year, citing its annual survey on employer-paid benefits in the U.S. The U.S. Consumer Price Index increased about 29 percent in the same period.
Boeing's nonunion workers will be briefed on the company's intention to make changes starting on Aug. 23, according to the presentation to managers by Rick Stephens, the human resources chief. Forte said the new costs will be determined by the end of October, take effect starting Jan. 1 and may be phased in over several years.
Medical expenses at Boeing will be $2.4 billion this year, with the company paying 89 percent of employees' costs, compared with the 70 percent average at peers including General Electric Co., 3M Co. and Lockheed Martin Corp., according to the documents. Boeing's benefits will still be "competitive," according to Stephens' briefing.
Union Contracts
Boeing's 20,500 unionized engineers in Seattle, the company's commercial base, agreed in 2008 to pay about $200 a year more for improved health-care coverage that cost the company about $3,000 extra for each employee.
About 2,600 Machinists in St. Louis, where Boeing builds fighter jets, authorized a strike in June before agreeing to a contract that will increase their share of monthly insurance premiums to 13 percent in 2014, from 12 percent now, and will boost copayments for some doctor visits.
About 1,700 assembly workers at the C-17 military transport plane factory in Long Beach, California, also agreed to pay more of their medical costs after a monthlong union walkout this year.
The savings efforts are "even more urgent now" as Boeing faces increased competition from abroad, Forte said. Airbus SAS overtook Boeing for the lead in commercial-jet building in 2003, and now rivals are entering the market from China, Canada and Russia.
Boeing and Airbus "have enjoyed a duopoly over the past couple of decades," Jim Albaugh, president of Boeing's commercial-jet unit, said today on a webcast of a Jefferies & Co. presentation from New York. "We know that will change."