Boeing Begs Its Union: Baby, Please Don't Go!


It's been a "good news, bad news" kind of a week for Boeing . On the good news front, on Friday the Federal Aviation Administration cleared Boeing to begin test flights -- carrying essential personnel only -- to try to help figure out why its 787 Dreamliners seem to be catching on fire lately.

The bad news may outweigh the good news, however -- or even pre-empt it.

Picket lines loom
Just 10 days remain before results are in on the contract approval/strike authorization vote that the Society of Professional Engineering Employees in Aerospace, or SPEEA, called on Boeing's "best and final offer" last month. Voting packages were mailed out on Feb. 5, and union members have until Feb. 19 to submit their votes. Now, Boeing is making a last-ditch appeal to union members to approve the contract.

On Thursday, Boeing reached out to SPEEA members in a missive that propounded the merits of its proposal, arguing that:

  • current employees' pensions would not be changed under Boeing's contract offer.

  • employee contributions toward health insurance will be likewise unchanged, at only 10% of actual cost.

  • union employees will benefit from a "5 percent salary pool" (i.e., 5% annual raises, on average, for employees), versus an average of 3% annual raises for management.

The company ended with an appeal to SPEEA workers to stay on the job and help fix the widely publicized "challenges on the 787 program."

Homey don't play that
SPEEA isn't buying it. To the contrary, Boeing's engineers union continues to urge its members to reject Boeing's offer and go on strike. Explaining his objections, SPEEA Executive Director Ray Goforth notes that among other things, Boeing's continuing to balk on a request that it protect SPEEA retirees from the risk that an incrasee in the age for Medicare eligibility will leave them uninsured. Most importantly, though, Goforth focuses on Boeing's pension proposal.

By switching new hires from a defined benefit pension program into a defined contribution 401(k) plan, says Goforth, Boeing will reduce the retirement benefits of future employees by 40% (Boeing says 33%), en route to ultimately freezing pension benefits for everyone, and forcing all employees to switch to 401(k).

As Goforth explained in an email: "If projections hold, it's entirely possible that the tipping point (where the majority of SPEEA members are those without the pension) could happen within two contract negotiation cycles. Once this group with the lesser benefit attains majority status in the union, it is expected that Boeing will insert the freezing of existing pensions into its last-best-final contract offer."

SPEEA's strike-call attempts to nip this plan in the bud.

One Fool's view
From an investor's point of view, there are two ways to look at this. First and most obviously, aside from a few quibbles over pension benefits, Boeing and SPEEA have come a long way in their negotiations. The pension dispute is really the only place where you can still see daylight between Boeing's proposed contract, and SPEEA's. This suggests that a strike can still be averted.

On the other hand, it's hard to escape the conclusion that Boeing has really bungled these negotiations. I mean, what has it got for its troubles so far? Months and months of contentious talks have ultimately brought Boeing back to offering 5% annual pay raises to its workers -- basically the same as they got under the previous contract, and really, all SPEEA ever wanted Boeing to agree to.

But if 5% is an acceptable number for Boeing, then why did it start out with demands that employees pay higher health-care costs, accept pension cuts, and accept pay raises as low as 3%? Thanks to overly aggressive demands like these, Boeing built up a vast store of ill will among its negotiating partners. Indeed, the animosity at this point is so great that an offer that -- let's be honest here -- is really within spitting distance of SPEEA's own proposal, could well be rejected, and apparently just because SPEEA is mad at how Boeing has behaved during the negotiations.

As we draw down into the final days of the union vote, here's hoping that cooler heads ultimately prevail, and that the union members will crunch the numbers, see that at long last Boeing's offering a pretty decent deal, and vote their pocketbooks. Here's hoping a strike can still be averted.

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