Boeing boosts offer to 35% raises as it loses $1 billion per month in strike

Oct 21

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Brent Jabbour (Senior Producer), Emma Stoltzfus (Video Editor)

The end of the Boeing strike may be in sight. After more than a month on the picket lines, union members will vote on Boeing’s latest contract offer this Wednesday, Oct. 23.

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It will be the first official vote since the vote to strike, but union members from the International Association of Machinists and Aerospace Workers District 751 have technically twice rejected what Boeing has put on the table.

“With the help of Acting U.S. Secretary of Labor Julie Su, we have received a negotiated proposal and resolution to end the strike, and it warrants presenting to the members and is worthy of your consideration…The future of this contract is in your hands,” the union negotiating team said.

Thirty-three thousand machinists walked off the job on Sept. 13 after the company offered 25% raises over four years and other compensation shortcomings. The latest offer brings salaries up 35% over the life of the contract, much closer to the union’s 40% ask.

In October, Straight Arrow News spoke with aviation analyst Richard Aboulafia about what significant wage increases would cost the company.

“You look at the role of what we call touch labor in the manufacturing process: it’s maybe 5-6% of the cost of an aircraft. And not only that, but there are various inflationary pass-through provisions in sales contracts,” Aboulafia said. “So even if they did boost wages by 40% or so, this wouldn’t really show up in terms of commercial competitiveness.

“The only possible sticking point is if Boeing absolutely doesn’t want to provide a structured pension program and the workers insist upon it,” he continued. “That’s about the only thing I could think of that would prevent two sincere parties from reaching a relatively quick agreement.”

Machinists lost pensions a decade ago and despite worker demands, the company is not keen to bring them back. The offer on the table does not include a pension but does strengthen the company’s 401(k) plan.

If signed, the company will make a one-time $5,000 deposit into every striking employee’s 401(k) account. In addition, the company will provide an automatic 4% contribution and a 100% company match up to 8% of pay.

Two days before the latest negotiated offer became public, leadership expert Gautam Mukunda predicted a similar result in an interview with SAN.

“Defined benefit pensions are going away,” Mukunda said. “There just aren’t that many of them left. I suspect that is a negotiating thing where if Boeing comes back and says, ‘We can’t give you that, it’s just not practical, no one gives that anymore; but we’ll give you 35% and we’ll give you a voice in governance,’ which they haven’t offered yet, that’s a very different conversation.”

Boeing hopes this latest offer, which does not include governance power, will get machinists back to work.

The company is bleeding out $1 billion for every month machinists are on strike. Boeing also announced furloughs of non-striking employees, a 10% layoff round in the coming months, and is now exploring asset sales to shore up finances.

Even if the strike ends, the company is in tremendous financial straits.

“It’s time to announce a strategy,” Mukunda said. “They’ve announced layoffs, 10% layoffs, but we don’t know what the guiding principle is here. We don’t know what they’re trying to do. Are they going to get rid of their space efforts, which have been floundering, to put it mildly in the ISS, and go all in on commercial? Are they going to continue to think about defense, where again, they’ve been struggling?

“I don’t know what Boeing’s strategy is, and if I don’t, the markets don’t either. So it’s probably time for them to say and to make a really clear picture of what that is,” he concluded.

The Wall Street Journal reported the company reached a deal to sell off a small defense subsidiary that makes surveillance equipment but has failed to offload a rocket joint venture with Lockheed Martin.

For a broader look at Boeing’s troubles, click here for an in-depth discussion with Mukunda.

Tags: Boeing, Boeing strike, Gautam Mukunda, IAM, IAM 751, International Association of Machinists, Labor Department, Richard Aboulafia, Strike, U.S. Economy

Simone Del Rosario: The end of the Boeing strike may be in sight.

After more than a month on the picket lines, union members will vote on Boeing’s latest contract offer this Wednesday.

It’ll be the first official vote since the vote to strike, but union members from the International Association of Machinists have technically twice rejected what Boeing’s put on the table.

This time, the union negotiating team says, “With the help of Acting U.S. Secretary of Labor Julie Su, we have received a negotiated proposal and resolution to end the strike, and it warrants presenting to the members and is worthy of your consideration…The future of this contract is in your hands.”

Thirty-three thousand machinists walked off the job on September 13 after the company offered 25% raises over 4 years and other compensation shortcomings. The latest offer brings salaries up 35% over the life of the contract, much closer to the union’s 40% ask.

Earlier this month, we spoke with aviation analyst Richard Aboulafia about what significant wage increases would cost the company.

Richard Aboulafia: You look at the role of what we call touch labor in the manufacturing process, it’s maybe five 6% of the cost of an aircraft. And not only that but there are various inflationary pass-through provisions in sales contracts. So even if they did boost wages by 40% or so, this wouldn’t really show up in terms of commercial competitiveness. The only possible area of The only possible sticking point is if Boeing absolutely doesn’t want to provide a structured pension program, and the workers insist upon it, that’s about the only thing I could think of that would prevent two sincere parties from reaching a relatively quick agreement.

Simone Del Rosario: Machinists lost pensions a decade ago and despite worker demands, the company is not keen to bring them back. The offer on the table does not include a pension but does strengthen the company’s 401(k) plan.

If signed, the company will make a one-time $5k deposit into every striking employee’s 401(k) account. In addition, the company will provide an automatic 4% contribution and a 100% company match up to 8% of pay.

Two days before the latest negotiated offer became public, leadership expert Gautam Mukunda predicted a similar result in an interview with SAN.

Gautam Mukunda: Defined benefit pensions are going away. There just aren’t that many of them left. I suspect that that is a negotiating thing, where if Boeing comes back and says, We can’t give you that, it’s just not practical. No one gives that anymore, but we’ll give you 35% and we’ll give you a voice in governance, which they haven’t offered yet. That’s a very different conversation.

Simone Del Rosario: Excluding that voice in governance, Boeing hopes this latest offer will get machinists back to work.

The company is bleeding out $1 billion for every month they’re on strike. It’s also announced furloughs of non-striking employees, a 10% layoff round in the coming months, and is now exploring asset sales to shore up finances.

Even if the strike ends, the company is in tremendous financial straits.

Gautam Mukunda: It’s time to announce a strategy, right? They’ve announced layoffs, 10% layoffs, but we don’t know what the guiding principle is here. We don’t know what they’re trying to do. Are they going to get rid of their space efforts, which have been floundering, to put it mildly in the ISS and go all in on commercial? Are they going to continue to think about defense, where, again, they’ve been struggling? But like, I don’t know what Boeing strategy is, and if I don’t, the markets don’t either. So it’s probably time for them to say and to make a really clear picture of what that is.

Simone Del Rosario: The Wall Street Journal reported the company reached a deal to sell off a small defense subsidiary that makes surveillance equipment but has failed to offload a rocket joint venture with Lockheed Martin.

For a broader look at Boeing’s troubles, search for this story titled, Boeing: The perfect story of what’s wrong with America’s economy? On SAN.com and the Straight Arrow News app.