Bloomberg News

Boeing Averts Immediate Strike as Labor Peace Elusive

February 20, 2013

Boeing Co. (BA:US) engineers and technical workers split their votes over a new contract, potentially avoiding a dispute that could have disrupted an investigation into battery faults that have kept the global 787 fleet grounded.

Engineers approved a four-year contract while technical workers, who act as their liaison with machinists, rejected the deal and authorized a strike any time, according to voting results announced by the Society of Professional Engineering Employees in Aerospace. The union said it will first resume negotiations with the planemaker (BA:US).

The divided results show labor peace (BA:US) is still elusive, even as Chicago-based Boeing (BA:US) counts on its workforce to help it recover from the global grounding of the Dreamliner fleet since Jan. 16 amid a plan to increase jet production to a record this year. Union engineers are working to find the source of two battery malfunctions and potential solutions to get the fleet of 49 787s back in the air and resume deliveries of 800 more.

“In an engineering company, what’s vital is good relations with the engineers,” Harley Shaiken, a labor professor at the University of California at Berkeley, said in an interview before the voting. “You want people inspired by what they’re doing, not at odds with the company management.”

Boeing (BA:US)’s offer was approved by 6,483 engineers, or 54 percent of votes, said the labor group. The union was granted strike authorization by 6,727 engineers, or 56 percent of votes in that tally, though it is a moot approval since the contract passed. Of the technical workers, 3,203, or 53 percent, voted against the contract and 3,903, or 64, percent gave strike authorization.

‘Deeply Disappointed’

The 15,550 engineers and 7,400 technical workers (BA:US), mainly at Boeing’s Seattle-area manufacturing and development hub, had been working without a contract since November. About 18,000 workers voted in yesterday’s tally, Speea said.

Boeing is “deeply disappointed” that technical employees rejected the company’s offer and authorized a strike, the company said in an e-mailed statement.

“The realities of the market require us to make changes so we can invest in new products and keep winning in this competitive environment,” said Ray Conner, president and CEO of Boeing’s commercial planes division.

The union had warned Boeing’s offer would cut retirement benefits for new hires by about 40 percent, divide the workforce and lead to the elimination of the pension entirely in favor of a 401(k)-style plan that’s riskier for employees.

Battery Faults

Boeing (BA:US) engineers and government agencies in the U.S. and Japan are still investigating two battery faults last month that led to a fire in one 787 and an emergency landing by another.

“The techs are constructing the containment vessel around the battery that they’re trying to get the FAA to buy off on,” said Ray Goforth, Speea’s executive director, said in an interview after the vote count. “If the techs go out on strike, it would stop all production of commercial aircraft, so they have a strong degree of leverage.”

Boeing (BA:US) had delivered 49 of the jets since the model’s entry into service in late 2011 and is still building five a month and working toward doubling production by yearend to fill a backlog of more than 800 orders. Deliveries halted after authorities began grounding the planes Jan. 16.

Average Salary

“Once a fix is approved, then that’s our work, to incorporate the changes into the existing airplanes as well as the engineering and planning to incorporate the change in the production airplanes,” Speea President Tom McCarty said in an interview as votes were tallied. “That actually takes a lot more than the 300 people who may now be investigating the problem and how to correct it. We are the workforce that will do that.”

Boeing has said the average engineer’s salary is about $110,000 a year, and the average technical worker makes $81,000.

Boeing chief engineer Mike Delaney said Jan. 11 that in the event of a strike, he could call on engineers in California. And Chief Executive Officer Jim McNerney said Jan. 30 that the company would have enough other experts to work on the 787 battery issue if engineers walked out.

Negotiations had turned bitter in recent months. Chicago- based Boeing said work will move to less expensive sites outside its Seattle jet-manufacturing and development hub if labor costs keep rising.

Speea, citing Boeing’s $12.6 billion in profits since 2009, says engineers deserve to be rewarded. The company has returned cash to shareholders with buybacks and a 15 percent dividend boost in that time period and increased McNerney’s compensation about one-fifth through 2011 to $22.96 million, the most recent figure available.

The company’s initial offer was rejected by a vote of 96 percent on Oct. 1. Boeing sweetened its proposal on Jan. 17, offering salary-increase pools of 5 percent a year over a four- year contract, matching the raises in the last wage deal.

Boeing didn’t budge from its plan to switch new employees to a 401(k)-style retirement plan from the pension workers get now. The union called it a “big poison pill” in an otherwise good contract offer.

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 dufner@bloomberg.net


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