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DECEMBER 29, 2003
Boeing: Putting Out The Labor Fires CEO Stonecipher is forging better union relations in an effort to keep costs down On Dec. 16, Boeing's new CEO, Harry C. Stonecipher, stood up in a Seattle convention center and announced that the company would go ahead with its 7e7 jetliner and build it in nearby Everett, Wash. "The 7e7 is a real game-changer," he declared as commercial-plane division chief Allan Mulally looked on approvingly. "Now let's go sell it." What Stonecipher didn't tell the assembled 3,000 Boeing Co. employees was that 10 days earlier, he had quietly approached the chief of the company's biggest and feistiest union, the International Association of Machinists, to offer an olive branch. At that meeting, Stonecipher not only told Machinists President R. Thomas Buffenbarger that Boeing would build the plane in Everett, he went much further -- offering to work hand in hand with the unions to end decades of bitter labor relations that have sunk employee morale to an all-time low. Why would Stonecipher, long considered a foe of organized labor, have such a radical change of heart? Company insiders say it's because he realizes that Boeing's future rests in part on its ability to deliver the 7e7 cheaper and faster than it has any previous jetliner. An angry Machinists union could disrupt those plans. Besides, Stonecipher has already wrested significant concessions from labor -- including 17,400 union layoffs since 2001 and an agreement to allow Boeing to outsource a large chunk of the 7e7 assembly work to Asia and Europe. By winning labor peace, Stonecipher can focus on shoring up Boeing's defense business. He also must reassure the Pentagon and Congress that the company's ethical scandals are over. Most of all, say people familiar with the man, Stonecipher, 67, wants to be remembered as the guy who saved Boeing. "Harry wants to turn the place around and take on Airbus," says a company insider. "He believes Boeing can compete." A POTENTIAL STRIKE? Stonecipher's charm offensive came as an utter surprise to Buffenbarger. The two met on Dec. 10 over scrambled eggs, toast, and coffee at the Mayflower Hotel in Washington, D.C. Buffenbarger says Stonecipher, who confirmed the meeting to BusinessWeek, pledged his support for assembling the 7e7 in the Seattle area and promised to give the Machinists a greater voice on the shop floor. "Harry Stonecipher is willing to throw the dice, and so am I," says Buffenbarger, a longtime critic of the CEO. "It's a risky bet, but the future of the company is at stake." Buying labor peace is crucial. Boeing will face the IAM at the end of May, when the contract expires for 6,000 workers at the military-aircraft division in St. Louis. A potential strike is the last thing Stonecipher needs as he tries to restore Boeing's credibility in Washington. Company insiders also say Stonecipher is betting that a closer relationship with the unions will help Boeing build planes faster and cheaper. The company has said it must keep boosting productivity by 3% to 5% annually to compete with Airbus. Buffenbarger says Stonecipher seems amenable to giving workers more say over how the 7e7 is assembled. The union is pushing an initiative called High Performance Work Organization, which gives workers more responsibility for making continuous productivity improvements. Execs at Harley Davidson Inc. and International Specialty Products, a maker of chemicals and pharmaceuticals, credit the initiative for helping to revitalize inefficient factories. Using a similar program at Boeing, says Buffenbarger, would free up capital and resources that could be devoted to engineering and product improvement. So what did the Machinists give up? First, they've accepted that outsourcing is a reality -- even though they still officially oppose it. Second, union leaders acknowledge that as Boeing plants become more efficient, there will be fewer jobs. With Boeing falling behind Airbus in orders and deliveries, the stakes are just too high to continue the bitter divisiveness. If Stonecipher succeeds in making some kind of peace with Boeing's combative unions, it could be one of his most ironic but enduring legacies.  By Stanley Holmes in Seattle
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