Boeing Strike: No End in Sight

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To pry any doubters loose, they sweetened the pot by offering more than $6,000 in bonuses, some $2,500 of which depended on getting a fast majority vote for the deal. The offer was, CEO McNerney told employees in a memo, "the best contract in the aerospace industry."

But the take-it-or-leave-it tack, which barred further talks before the vote, proved to be a dud. Boeing blitzed the Seattle radio waves with ads making the case for the deal and urged workers to read the details about its offer on the company Web site. But such tactics, union leaders charged, amounted to improperly going over the heads of the union bargainers. The communications, they bristled, were nothing more than a bid to bargain directly with workers—an approach that seemed quickly to backfire as the leaders condemned "givebacks" that offended them.

The workers, meanwhile, were furious. Angered by proposals the company was floating, they had been staging marches around the factories. The distractions made it impossible to get work done, some workers say.

Outsourcing Fears

The union pored over the offer and pounced on terms it found objectionable. Trims in health-care benefits loomed large, even though Boeing officials insist the changes on balance would be neutral, with higher co-pays offset, for instance, by cuts in premiums. Even more problematic, however, is the company's power to subcontract work, to let suppliers from around the U.S. and in other countries provide parts and have nonunion outsiders deliver such goods to the assembly lines in Washington. The union fears that such outsourcing, which it says has been on the upswing, will ultimately kill off jobs. Management contends that globalization requires it be able to have work done around the world—especially in countries where that might help it sell more planes.

McNerney "wants the flexibility to do what's right for the business," says Noel Tichy, a management professor at the University of Michigan who has known McNerney since he was a rising star at General Electric (GE) in the 1980s. It's an issue, Tichy says, on which the CEO can't compromise.

"Can you together work out a reasonable compromise? Yes," says the professor. "But I think it's [McNerney's] position that there are some things that he does consider non-negotiable, and the other side is saying the same thing."

Part of the problem is union officials have long memories. Some are still troubled that the outsourcing power was put in place in a nettlesome contract in 2002. That contract went into force only because the union fell short of getting a two-thirds vote for a strike, even though most members opposed the contract. Then the union was unable to get the language pulled in 2005. "It puts our members' jobs at risk," says negotiator Blondin.

Striking Mad

By Sept. 3, when 87% of the workers backed a walkout, it was clear the union had long been spoiling for a fight. Sporting T-shirts emblazoned with the slogan "It's Our Time This Time," the workers paraded to the union polls led by motorcycle-riding colleagues. Many were angry when the union leaders agreed to delay the strike for 48 hours, until late Sept. 5, to see if any common ground could be found.

Some machinists argue that Boeing, which has been blessed with record profits and its biggest backlog of plane orders ever, can well afford to scrap all "givebacks" and to "bargain up," as a union spokeswoman said. Gutting the outsourcing language is a key part of what the union hopes to gain. Its leaders figure that concerns about further delays for the new 787 Dreamliner (BusinessWeek.com, 8/29/08), on Wall Street and in the Boeing executive suite, give workers leverage.

It's really anyone's guess just how drawn out and costly this fight will ultimately be. Analyst Cai von Rumohr of Cowen & Co. (COWN) figures a strike could last between 29 and 65 days, pushing a conclusion into mid-November at the latest. He figures the end of health-care coverage, at the opening of October, will put the first bit of serious pressure on workers, while in November the approach of the holidays steps it up. The union went on strike at Boeing for 69 days in 1995.

Internecine Costs

Von Rumohr estimates Boeing could lose as much as $2.3 billion in revenues this quarter. Some of that, of course, could include deferred rather than lost sales, but company officials do fret that demand for planes could slip over time, especially as the global economy slows.

Some workers say they'd love to see a change in the contentious relationship between the company and the union that flares anew with every contract round. "My family and I are completely exhausted with going through a financial disaster or potential disaster every three years," says one 21-year veteran worker. On the other hand, he looks on the IAM as one of the last strong unions able to hold the line on hard-fought gains, while other industrial labor groups have folded.

For the company's part, when Kight began the talks with the union back in May, he seemed to do so with the best intentions. "Boeing's goal is to create an open and honest environment by communicating frequently and having robust discussions," he told managers back then in an e-mail message. But when the differences—and distrust—are deep, honesty may do little to bridge the gap. Instead, it boils down to which side can stand the pain of a strike long enough to claim victory.

Business Exchange related topics:
Aircraft Manufacturers
Airline Industry
Boeing 787

Joseph Weber is BusinessWeek's chief of correspondents, based in Chicago.