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Boeing Contract Choice: Corporate Arrogance or Union Fantasy

SEATTLE (TheStreet) -- The battle between Boeing (BA - Get Report) and the International Association of Machinists is a tough one to watch, matching corporate arrogance against union miscalculation.

Boeing is among America's best companies. Part of a global duopoly, it produces great products: customers line up years out to buy them. It is America's leading exporter and a symbol everywhere of American ingenuity and competence.

In some ways, Boeing is more a nation-state than a company. It has its own Congressional delegation to do its bidding and a private bank, called the Export-Import Bank, which provides government backing for below-market loans to Boeing customers. Nearly half of Ex-Im Bank loans go to Boeing customers, some of them state-owned Middle East airlines that compete with U.S. airlines.

All of this vast success has gone to Boeing's head. It wants to play chicken with its workers and the state of Washington, its principal home since 1916, because it thinks it cannot lose. The 787 Dreamliner production fiasco, a leap too far in outsourcing that nevertheless involved a miracle product, is a symbol of all that is wrong with Boeing, as well as all that is right.

The IAM, like its peers, confronts the decline of the labor movement. But it has often seemed to embody labor practicality. While it has never been afraid to strike, it has sometimes been smart enough not to strike. It has struck Boeing, but also it has worked hand-in-hand with Boeing, time after time, to secure government contracts.

Now a Boeing "offer" has forced an ugly split between the IAM's national leadership and local leadership in Washington.

In December, Boeing submitted a wish list, which it called a contract offer, to its 31,000 Seattle-area workers. The document was accompanied by a threat to move production of the 777X, a future plane with massive potential, out of the Seattle area. It included higher health care premiums, the end of defined benefit pension plans, and fixed wage increases. What unionized company would not like to have all of these things? Most non-union companies already have them. Boeing gave workers one week to decide.

The offer was handily defeated. The parties talked again. Boeing made some limited improvements, valued by IAM national leadership at $1 billion. Then Tom Wroblewski, president of IAM District 751, and other local leaders declined to submit the offer to a union vote, saying the end of the defined benefit pension plan and other contract changes were not acceptable to members. National IAM leadership overruled local leadership.

A vote is scheduled for  Friday. Members face a tough choice between resistance, which their local leaders advocate, and reality.

Defined benefit pension plans are rapidly disappearing, thanks to societal trends, high funding requirements and the decline of the labor movement. The funding requirements are particularly burdensome at a time of historically low interest rates. Through bankruptcy, airlines, automakers and other companies have mostly eliminated or frozen these plans. Unions used to be able to protect workers from corporate efforts to degrade their pension plans, but that is no longer the case.

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