Boeing Union Rejects Offer, Delays Strike for Talks
NEW YORK. Boeing Co.'s largest union rejected a contract offer, giving the world's largest planemaker 48 hours to revise it and avert a strike that may further delay the 787 Dreamliner.
The International Association of Machinists and Aerospace Workers said in Seattle last night that 80 percent of the voters opposed the contract and 87 percent supported a walkout. Chicago-based Boeing had offered an 11 percent raise over three years while rejecting union efforts to limit the use of outside contractors for work the machinists have traditionally done.
``We believe that the parties' positions remain quite close to one another, but we think it may be difficult for the union to achieve specific guarantees regarding future outsourcing,'' Harry Nourse, a Bank of America Securities analyst in New York, wrote after the announcement.
A walkout would threaten to prevent the 787, Boeing 's most successful new plane, from flying this year and stymie efforts to deliver a record $275 billion in orders as energy prices spur airlines to buy new, more fuel-efficient jets. Boeing 's only larger rival, Toulouse, France-based Airbus SAS, is also facing delays with its main new program, the A380 superjumbo.
The IAM represents 27,000 workers in Washington, Oregon and Kansas. Leaders Mark Blondin and Tom Wroblewski were shouted off the union-hall stage last night by workers in Seattle, many already holding `On Strike' signs, primed to walk off the job immediately.
``It was our job to negotiate a contract that's acceptable to you, not to negotiate a strike,'' Wroblewski told the crowd. Even so, union leaders had asked workers to reject the offer and vote to support a walkout.
Boeing `Disappointed'
Boeing 's lead negotiator, Doug Kight, was ``disappointed'' by the vote, he said at a press conference. ``Our job at this point is to listen to the union; we put the last contract offer on the table. We will seek to understand and then make an assessment to see if there is a path forward.''
The company agreed to a request from federal mediators to negotiate another 48 hours, Kight said, adding that he's willing to hear out the union on the ``critical few issues.'' The two sides, which began final talks Aug. 21, broke off negotiations Aug. 28 when Boeing made what it called its best offer.
The union wants at least a 13 percent wage increase, higher pension payments, no changes to health care and the ability to take back some of the work that's being done by outside vendors, Wroblewski said in interview yesterday. He is president of the IAM's District 751 in Seattle.
Planemaker's Offer
Boeing dropped most plans the union had termed ``strike issues'' and offered a package that would boost overall average compensation, including overtime, bonuses and benefits, by 23 percent over three years to $110,400. The company said it made sure the offer was sustainable and would keep it competitive.
Machinists have gone on strike over three of the last six contract negotiations. The most recent walkout shaved $300 million from second-half earnings in 2005.
A 30-day strike this year would reduce Boeing earnings by about 30 cents a share, Macquarie Research Equities analyst Rob Stallard estimates. The average estimate of 20 analysts in a Bloomberg poll is for the company to earn $5.81 a share. Howard Rubel, an analyst at Jefferies & Co., predicts a strike may cost $120 million a day in lost revenue.
Effect on Stock
Boeing fell 99 cents to $65.08 at 9:31 a.m. in New York Stock Exchange composite trading. The stock has dropped 33 percent since Oct. 10, when the first of three Dreamliner delays was announced due to parts shortages and incomplete work by suppliers.
The union hall erupted after labor leaders announced the 48-hour reprieve before a possible strike. The negotiation period ends at 12:01 a.m. on Sept. 6.
``I want to punish the company so that's what I'm upset about,'' said Robley Evans, 46, who has been a Boeing machinist for 23 years. ``But if they think they can get this thing resolved in 48 hours, then I have to put my personal feelings aside and support them in that.''
The average machinist is age 46, which has dropped since the 2005 contract as Boeing has hired more workers. While the average salary is about $54,000 a year, more than 4,000 machinists make less than $30,000, union spokeswoman Connie Kelliher said. The typical Seattle-area machinist starts at $12.72 to $28.22 an hour, which would advance $2.28 an hour under Boeing 's offer.
Dreamliner Impact
Boeing planned to fly the 787 in November and deliver it in next year's third quarter, at least 14 months later than first planned. If a strike were to exceed a week, Boeing ``probably would not'' manage to meet the revised schedule, said analyst Paul Nisbet of JSA Research Inc., an aerospace equity analysis firm in Newport, Rhode Island.
Boeing has sold 895 Dreamliners worth about $155 billion, pitching its light weight to airlines as a way to save fuel costs. Airbus's A380 takes a different approach to reducing fuel expenses by putting 525 passengers on a larger aircraft. The company, a unit of European Aeronautic, Defence & Space Co., has built more jets than Boeing every year since 2003.
Airbus said May 13 that the A380, which was already two years late when it entered service this year, faces another three to five months of production delays because of problems in switching to a digital mockup unit for serial production.
