Bloomberg News

Boeing Labor Deal May Avoid Strikes While Ending 787 Complaint

November 30, 2011

Nov. 30 (Bloomberg) -- Boeing Co.’s tentative contract agreement with the Machinists union to keep building the 737 jet in Washington state may help resolve a U.S. labor complaint against the company over the 787 Dreamliner.

The National Labor Relations Board accused the company in April of violating federal law after Machinists complained that Boeing moved some work on the plastic-composite 787 outside its Puget Sound manufacturing hub in retaliation for four strikes since 1989.

Boeing decided in 2009 to add a 787 production line in South Carolina, where law forbids requiring union membership as a condition of employment. The planemaker said this year it would also consider sites outside of the existing 737 assembly plant in Renton for production of the new MAX variant. The Machinists’ deal also assures nearly a decade of labor peace by extending the contract another four years.

“This is an extraordinary development,” said Howard Rubel, an analyst with Jefferies in New York. “It has been almost a tradition that the union strike to get a ‘better deal’ at the end of each contract. The potential for this deal could enable Boeing to improve its competitiveness and clearly shows a genuine effort at finding solutions to vexing problems.”

If union members ratify the contract next week, Tom Wroblewski, president of Machinists District 751, said he would meet with the NLRB “to inform them that we believe all our grievances with the Boeing Co. will be resolved.”

NLRB Case

The labor board views the Machinists’ agreement as a “very significant and hopeful development,” Acting General Counsel Lafe Solomon said in an e-mailed statement, adding that he’d be in discussion with all the parties about the next steps in the process.

Nancy Cleeland, a spokeswoman for the board, said the complaint won’t be automatically dropped and declined to speculate on whether it would be.

Under the proposal, machinists would get a 2 percent wage increase each year of the contract. They’d also get a new performance-based incentive program, their pensions would be preserved along with retirees’ medical benefits, and they’d get a $5,000 ratification bonus.

Boeing is hiring about 100 Machinists a week as it boosts production by about 60 percent over three years to whittle down a backlog that now stretches to nearly 4,000 aircraft. If the company had chosen another state for the 737 MAX plant, however, the Renton facility could have shut down within a decade.

Puget Sound

“Landing the MAX means there’s a stronger future for Puget Sound,” said Connie Kelliher, a Machinists spokeswoman in Seattle. “If we hadn’t gotten it here, we would have been left dying on the vine. It would have been a clear signal the other way.”

The deal requires Machinists to pay more for their health care, one of the reasons for the 2008 strike that eventually led to the labor complaint. Kelliher said union representatives had already gone out to the shop floors to promote the deal. “The benefits are only good if you’re on the payroll to collect them,” she said. “What are the best benefits in the world worth if the work goes away?”

The government’s legal action over the 787 move prompted a barrage of criticism, both from South Carolina and from Republican lawmakers who said businesses have a right to choose where they operate. The union accused Boeing of trying to win politically because it couldn’t do so in court.

Production Stability

The planemaker had cited a need for production stability in choosing North Charleston, South Carolina, for the 787 line after the 2008 strike. That labor action lasted two months, slashing revenue by as much as $6.4 billion.

Because of the possibility of a similar action, “striking a deal 10 months before contract expiration and ahead of major production rate increases removes a significant overhang,” Heidi Wood, a New York-based analyst with Morgan Stanley, said in a note to clients. “The thunderclouds are clearing.”

--Editors: James Langford, John Lear

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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