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Boeing CEO Sees Labor Peace but Union Says Not So Fast

CHICAGO (TheStreet) -- Boeing (BA) CEO Jim McNerney said relations between his company and its principal union have improved since a dramatic vote to accept contract concessions in return for thousands of new Seattle-area jobs, but the union said it's a little early to draw that conclusion.

During Boeing's earnings conference call on Wednesday, McNerney was asked about the impact of the vote by 32,000 members of Local 751 of the International Association of Machinists. IAM members approved the contract by a 51%-49% margin in January, after two-thirds of them voted to reject the contract in an initial vote. The contract extends until 2024 and means that work on the new 777X will be done in the Seattle area, potentially creating 10,000 jobs.

"We see angst over this contract extension," McNerney said. "(But) we're entering a period of 10 years of stability, that's the big picture.

"The vote was close," he said. "In the end, everybody centered on this huge business opportunity we've got with the 777X and came together."

McNerney said Ray Connor, CEO of Boeing Commercial Aviation, is "reaching out (and) the union out there is also reaching out. ...There's more interaction between 751 and management then there's been in a long time. Emotions will still play a role, but with a 10-year opportunity in front of us, I think fairly quickly we're going to come together and capitalize on that."

IAM spokesman Frank Larkin said it's "a little bit early" to conclude that relations have improved, but he noted, "We've heard from a lot of people who are grateful it was resolved the way it played out."

Larkin said Boeing moved a long way from its initial assertion to IAM President Tom Buffenbarger that it planned to locate 777X outside Seattle without any discussion regarding a contract. Buffenbarger subsequently convinced Boeing to give workers an opportunity to vote on a contract that would enable the work to be done in Seattle.

"A unilateral decision by the company would have been far more controversial" than a vote to make concessions and gain new work, Larkin said. "Controversial issues are often resolved by close votes -- but only in workplaces where collective bargaining gives workers that opportunity."

Still, relations between Boeing and the union have a way to go before rising to the level they reached after the two parties reached a landmark deal that enabled production of the 737MAX in Renton. That deal, negotiated in just six weeks in late 2011, extended the contract for four years until 2016. Also, the IAM agreed to drop a case claiming that Boeing violated labor law when it opened the South Carolina 787 line.

The deal, unanimously approved by the Local 751 negotiating committee, also provided for regular meetings between Boeing executives and union leaders. It was in one of those meetings that the plans to build the 777X outside of Seattle were first brought to the IAM's attention. This time, "things haven't improved that dramatically, not yet," Larkin said.

Boeing said Wednesday that it spent about $300 million in the fourth quarter to pay $10,000 cash bonuses that came with the contract approval. The company will take a non-cash $140 million pension charge in the first quarter as it anticipates the costs of converting from a defined-benefit plan to a defined contribution plan.

Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

Follow @tedreednc

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