(Updates with comments from analyst in fourth paragraph.)
Dec. 8 (Bloomberg) -- Boeing Co. Machinists asked the National Labor Relations Board to drop a complaint against the planemaker after union members approved a new contract that increases production in Seattle and averts the risk of a third straight strike.
About 74 percent of Machinists supported the contract yesterday in a ballot among 31,000 union members, mostly in the Seattle area, who accepted the surprise proposal unveiled last week that extends the current agreement by four years.
Boeing will be strike-free through 2016 amid plans to boost output by 60 percent after four Machinist walkouts since 1989 delayed hundreds of deliveries. Workers were promised that a revamped version of the 737 jet will be built at a current factory near Seattle, and the union requested the NLRB retract the complaint filed over a new 787 plant in South Carolina.
“To avoid disruption during the next several years when production is expected to ramp up to over 650 planes per year translates into a notable reduction in risk for Boeing,” Howard Rubel, an analyst with Jefferies & Co. in New York who recommends buying the shares, wrote in a note today.
The shares fell 0.4 percent to $70.31 at 12:31 p.m. New York time. Through yesterday, the planemaker had jumped 8.2 percent since Nov. 29, the day before it announced the tentative agreement with Machinist union leaders.
Turned a Corner
“I’m confident we’ve turned an important corner in the 76- year relationship between Boeing and the IAM,” the union’s vice president, Rich Michalski, said in a statement last night. “Both sides are committed to maintaining the high levels of communications and cooperation that produced this agreement.”
The Machinists accepted the accord nine months before their contract was set to expire. Workers will get a 2 percent wage increase each year of the contract, a new performance-based incentive program and a $5,000 ratification bonus that will be paid later this month. Pensions will also be preserved along with retirees’ medical benefits.
Still, employees will have to shoulder more of their health-care costs, which was one of the proposals that prompted a strike three years ago.
Boeing Commercial Airplanes President Jim Albaugh said in an interview shortly after the results were announced that the contract is “a fair deal” that is “good for everybody.”
The union was “approaching a collision with Boeing, so in effect they have created jobs for the members, diffused the collision and a very volatile political issue on the eve of the election, and signed an agreement, all in the same stroke,” Harley Shaiken, a labor professor at the University of California at Berkeley, said in an interview earlier this week. “Both sides were faced with uncertainty and real losses, and the nature of collective bargaining is seizing the moment.”
The faltering relationship between the planemaker and its largest union reached a new low two years ago, when Boeing decided to build its first commercial assembly plant outside the Puget Sound area, where the company was founded in 1916.
The Machinists complained to the NLRB after executives’ comments that the new 787 facility in South Carolina would avoid walkouts in Washington. The new plant isn’t unionized, and that state forbids requiring union membership as a condition of employment. The labor board investigated and accused Boeing of violating workers’ federally protected right to strike.
The NLRB has said it will consider the union’s request for a dismissal of the case.
‘Pivotal Manufacturing Firm’
“It’s an unusual moment,” Shaiken said. “It’s not simply any company, it’s the largest exporter, one of our high-tech leaders, a pivotal manufacturing firm. What happens here is critical.”
The team developing the 737 MAX has 300 people based at the narrow-body factory in Renton, south of Seattle, and will expand to more than 1,000 in the next two years, Boeing said in an online message to employees last week.
Albaugh didn’t give more specifics on production-site plans for the 737 MAX, which Boeing decided in July to build as a challenge Airbus SAS’s rival A320neo. The plane has won about 700 commitments so far, and “at least one” firm order -- which will be the first -- will be signed by Christmas, Albaugh said.
The plant is now producing a record 35 planes a month, which Boeing intends to raise to 42 by 2014. The company hopes to reach this goal without making any investments, Albaugh said.
“In the spirit of this contract, we’re going to work with the union to figure out ways to build more,” he said.
Committed to Max
Albaugh refuted Airbus Chief Operating Officer John Leahy’s comments last week that Boeing may scrap the MAX, due to enter service in 2017, and go back to its original preference of building an all-new single-aisle plane instead.
“There is no team working in the back room on a new small airplane,” he said. “We’re committed to the MAX. We’re going to build the MAX in Renton. And we’re going to continue to command a large share of the market.”
As with the 787’s beginning almost a decade ago, Boeing didn’t promise exclusivity to Washington state.
Winning at least some of the MAX work is important, even if Boeing ends up putting a portion of the manufacturing elsewhere as it did with the 787, Tom Wroblewski, president for Machinists District 751, said in an interview before yesterday’s vote. Production of the current 737, built exclusively in Renton, could stop by the end of this decade.
“Their long-term vision is to get to 60 airplanes a month” in Renton, Wroblewski said. “That’s the commitment -- they’re going to stuff as many airplanes as they can into it -- and we’ve never had that type of commitment. It’s a change in how we do business with this company.”
--Editors: Neil Denslow, Cecile Daurat
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