Nov. 6 (Bloomberg) -- Boeing Co. offered to build its upgraded 777 twin-aisle jet in the Seattle area if members of its largest union accept benefit cuts and a contract extension that would ensure labor peace for the next decade.
Ratification of the terms by Machinists union members would cement a new working relationship between the planemaker and the labor group after years of labor strife at Boeing’s commercial hub in Washington’s Puget Sound region.
The proposal “means decades of economic activity for the region and will anchor the next generation of wide-body aircraft production right here in its historic birthplace,” Tom Wroblewski, president of the union’s District 751, said in a statement yesterday. It also provides job security for thousands of union workers, he said.
Washington Governor Jay Inslee, a Democrat, is also assisting the effort to land Boeing’s next big jet by proposing a package of tax incentives and transportation infrastructure investments that would provide $8 billion in benefits to the Chicago-based aerospace company through 2040.
The governor has called state lawmakers to review the proposal during a weeklong special session that begins tomorrow.
“We have decided to step up and design our future rather than hide from it,” Inslee said during a press conference yesterday. He was flanked by company and union leaders who negotiated the 777X proposal, including Wroblewski and Ray Conner, president and chief executive officer of Boeing’s commercial airplane unit.
Boeing rose 0.7 percent to $134.05 at 9:43 a.m. in New York. The stock jumped 77 percent this year through yesterday, the biggest advance among the 30 companies in the Dow Jones Industrial Average.
The machinists’ union, which represents about 35,000 Boeing workers, has sought to keep production of the company’s top-selling wide-body plane in the Seattle area, Frank Larkin, a union spokesman, said in a phone interview Nov. 4. Talks intensified over the last week as Boeing approached a decision as to where the new jet will be built, Larkin said.
Boeing is seeking an eight-year extension to a contract that expires in 2016, the union said. Its proposal would freeze pension accruals for current employees and establish an alternate company-funded retirement plan. All members would receive a $10,000 bonus once the new terms are ratified.
In exchange, the upgraded version of Boeing’s largest twin-engine model would continue to be built at the planemaker’s factory in Everett, Washington, while the plane’s giant carbon-fiber wing would be assembled at a separate facility in the region.
“This is important to everyone with a stake in Boeing – including our employees, the community and our customers,” Conner said in a statement yesterday. “We look forward to the ratification.”
The redesigned 777 may be unveiled at the Dubai Airshow this month amid a record haul of orders. Boeing is in talks with at least four airlines for commitments valued at as much as $87 billion, people familiar with the matter have said.
The proposal comes amid a Boeing initiative to shift engineering and manufacturing from its traditional manufacturing base in Washington state’s Puget Sound area.
The company operates a second assembly line for the 787 Dreamliner at a non-unionized plant in North Charleston, South Carolina. Last week, Boeing said it had assigned much of the detailed design work for the 777X away from the Seattle area, with tasks split among engineering centers in South Carolina, Alabama, California, Pennsylvania and Missouri and supported by a facility in Moscow.
Yesterday’s deal mirrors a 2011 agreement between the machinists’ union and Boeing that kept production of the single-aisle 737 Max jet in Renton, Washington, in exchange for a five-year labor contract.
The union crippled Boeing’s commercial jet production with a 57-day strike in 2008 and a 28-day work stoppage in 2005.
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