Boeing’s Machinists Face a ‘Leap of Faith’ in Landmark Vote on Wage Accord

Boeing Co.’s (BA) Machinists union is voting on a landmark contract today that may thaw decades of hostility with the planemaker’s management while helping boost jet production to records.

The surprise proposal unveiled last week to about 31,000 workers, mostly in the Seattle area, would extend the current agreement by four years. That would keep Boeing strike-free through 2016, after four Machinist walkouts since 1989 delayed hundreds of deliveries and cost the company billions.

If workers ratify the contract, Boeing will build its planned 737 upgrade at the current factory near Seattle, while the union will seek to retract a National Labor Relations Board complaint over a new 787 Dreamliner factory in South Carolina. The NLRB case had been denounced by congressional Republicans.

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,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “Both sides were faced with uncertainty and real losses, and the nature of collective bargaining is seizing the moment.”

The agreement requires “a leap of faith on everyone’s part,” said Tom Wroblewski, president for Machinists District 751. Voting will continue through 6 p.m. Seattle time today, with results announced after ballots are counted, according to the Machinists’ website.

Right to Work

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 state law forbids requiring union membership as a condition of employment. The labor board investigated and accused Boeing of violating workers’ federally protected right to strike.

Wroblewski said he’s met with union members every day since the proposal was unveiled a week ago, trying to convince them to trust their employer and protect their jobs.

‘Impossible to Predict’

“The vote is impossible to predict,” Shaiken said. “It’s an unusual moment. 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.”

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

“These aren’t the times when workers are going to reject wage increases or bonuses,” said Gary Chaison, a labor-law professor at Clark University in Worcester, Massachusetts. “This is a time when, for unions, not losing is the equivalent of winning.”

Before today, Boeing climbed 8.6 percent to $70.87 since its agreement with the Machinists was announced. The shares dropped 1 percent to $71.33 at 12:56 p.m. in New York.

The context of the faltering economy along with movements against labor groups elsewhere in the country this year is crucial, both professors said.

‘Embarrassment of Riches’

Still, union members are aware that Boeing has racked up profits of more than $7 billion since the last contract vote in 2008 and amassed a $273 billion commercial jet backlog that’s compelling it to raise output 60 percent from current records. And requiring employees to shoulder more of their health-care costs -- part of the new proposal -- was one of the reasons for the strike three years ago.

“Boeing’s problem is an embarrassment of riches,” Chaison said. “It has too much money, so that’s why the rank-and-file might not think of this as a great agreement.”

Wroblewski said executives and union leaders began meeting about six weeks ago to discuss “how to get through 2012,” with labor negotiations starting ahead of the contract’s September expiration, testimony in the NLRB case, a decision due on where to build the 737 MAX and planned production increases.

737 MAX Employees

The contract that eventually resulted is a “landmark agreement,” Boeing Commercial Airplanes President Jim Albaugh, in a video message to workers last week.

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. The company didn’t give more specifics on production-site plans for the jet, which Boeing committed to in July to challenge Airbus SAS’s rival A320neo. And just as with the 787’s launch almost a decade ago, it didn’t promise exclusivity to Washington state.

Albaugh acknowledged that “some questions have arisen around Boeing’s commitment to building the 737 MAX in Renton. Let me be as clear as I can possibly be: If this agreement is ratified, the MAX will be built in our Renton facility.”

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, Wroblewski said. Production of the current 737, built exclusively in Renton, could stop by the end of this decade.

‘Long-Term Vision’

“Their long-term vision is to get to 60 airplanes a month” in Renton, from 35 now, 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.”

The agreement also calls for keeping wide-body jet manufacturing as well as production of the P-8 submarine hunter assembly line, made by Boeing’s defense business, in Washington. If Boeing decides to close down its Wichita, Kansas, operations as it’s studying, it will move modification work on the U.S. Air Force’s newly ordered aerial-refueling tankers to Puget Sound.

Whatever the Machinists decide today may affect the contract for about 25,000 engineers and technical workers represented by the Society of Professional Engineering Employees in Aerospace, which expires Oct. 6, 2012.

“When our members are upset, they’re not quiet,” said Connie Kelliher, a Machinists spokeswoman. “We’ve had proposals that they’ve thrown in the burn barrel before I’ve gotten out of the car. Our members give strong reactions,” yet haven’t organized protests in the week since the proposal was announced. “Gauging off that and the e-mails we’re seeing, it’ll pass.”

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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