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Boeing Contract Vote Produces Winners and Losers

Stocks in this article: BA

SEATTLE (TheStreet) -- Score one for Boeing (BA) in Friday's International Association of Machinists contract vote, in which 32,000 Boeing workers agreed to contract concessions in exchange for more jobs for Washington and more job security for themselves. Score one for Washington state, where Boeing will produce the 777X, its newest plane.

Also, score one for the IAM and its national leadership. The union got to the right answer despite a difficult negotiating environment in which two votes were rushed, workers had little information in the first election, the company held all the cards and the union's internal disagreement was publicly exposed. Democracy isn't pretty.

Who were the losers in the contract talks? That one is easy. Boeing said 22 states submitted proposals for 777X work. Washington won. South Carolina didn't get the 777X, but it did get a $1 billion expansion of its 787 facility.

So 20 states got nothing. Some including Washington publicly fawned over Boeing, offering all manners of tax incentives. Fawning over a company is unbecoming, but fawning and losing is even more so.

Overall, the Boeing contract negotiation story is a sign of the times. Big companies generally get what they want, whether by lobbying Congress or threatening to move. The union movement has been badly weakened in recent years, but it has managed to hang on at Boeing and at airlines and automakers.

And everywhere exists the belief that whatever works is worth doing. This belief inspires states and cities to compete against one another, not just for good jobs like those at Boeing but also, in far less logical scenarios, for professional sports teams.

Looking at Boeing, it is a fabulously successful company that submitted a concessionary contract "offer" accompanied by a threat to place its new work outside the Seattle area, its principal home since 1916. The offer included reduced health care benefits, fixed rate salary increases, elimination of a defined benefit pension plan and foregoing the right to strike until 2024.

Boeing won because it got a better contract, it prevented any IAM work stoppage until at least 2024, and it was spared the trouble of relocating work away from its home.

As for the IAM, it suffered because its internal squabbles were exposed to the world. That is never good for anyone, whether it happens in a divorce case filing or in a contract dispute.  But to its credit, the union got to the right answer.

IAM national leadership had to overrule local leadership. Local leaders were wrong to stand in the way of a second vote by their members. Also, they chose not to recognize a harsh reality. But they were not wrong to stand up for the defined benefit pension plans they had so carefully protected and for retention of their right to strike in 2016. Union contracts, often enabled by the right to strike, once ensured good working conditions for most Americans.

Many arguments support the case that Boeing workers made the right decision. For one, the IAM has been so successful in negotiating contracts over the years that even Boeing's concessionary contract offer looked good to most people. Moreover, contract rejection would have damaged those voting to reject, given a potential decline in the value of their homes had Boeing stopped growing or shrunk in Seattle.

Also, it is difficult to accept the argument, advanced by some, that Boeing bluffed when it threatened to move 777X work out of Seattle. Boeing seems satisfied with the work done on the 787 in South Carolina, even if recent reports suggest that production is slower than expected and even if the state's governor makes statements like, "I wear heels, and it's not for a fashion statement. It's because we're kicking the unions every day." Come to think of it, perhaps Gov. Nikki Haley speaks for Boeing.

Boeing said last month that it will spend $1 billion to expand in South Carolina, which apparently was among the 22 states that bid for 777X work. It cannot be said that South Carolina lost -- it got something.

As for the remaining 20, most are not even known. The most aggressive was Missouri, which put together a $1.7 billion incentive package. Others reported to be courting Boeing were Alabama, California, Kansas, North Carolina, South Carolina, Texas, and Utah.

Obviously, it's not wrong for states to chase good jobs. But it looks bad to lose.

Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

Follow @tedreednc

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