Boeing Offer Falls Short (Update) - TheStreet

CHARLOTTE, N.C. -- In its final offer to 27,000 unionized workers,

Boeing

(BA) - Get Report

boosted earlier pay offers but didn't back down on its desire for the flexibility to increase outsourcing.

"We believe this is the best contract offer in America this year," Doug Kight, Boeing's lead labor negotiator, told reporters Thursday, hours after the company made its final offer to negotiators for the International Association of Machinists. "We believe it will probably be the best contract offer in America next year and maybe the year after."

The offer enables employees "to share in the success ... have helped to create, but also is good for our business," he said.

Now Boeing will begin trying to sell the offer to union members, a multimedia effort that will include radio commercials by Scott Carson, CEO of Boeing Commercial Airplanes. However, although Kight praised the IAM negotiators, he made it clear the company has nothing more to negotiate in the days before a scheduled Sept. 3 vote.

If they reject the contract, workers could strike as early as Sept. 4 , but only if two-thirds of those voting also vote to go on strike.

Boeing offered a pay increase of 11% over three years, up from the offer of 9% it made on Tuesday, as well as several tempting sweeteners. They include a signing bonus of $2,500 if the contract is approved in the scheduled Sept. 3 vote, as well as an additional lump-sum payment of $2,500 -- or 6% of annual pay, whichever is more.

Additionally, cost-of-living adjustments are projected to add 3% to workers' salaries, incentive pay would begin in the contract's third year, and pension payments would rise to $80 monthly for each year of service, up from $70.

On average, the offer will provide employees with $34,000 in additional pay over three years, Kight said.

On Thursday, Boeing also withdrew a proposal to eliminate retiree health care benefits for future hires who retire before age 65, and it withdrew a proposed contract change regarding facilities management subcontracting.

But the company did not make major alterations in contract language that allows it to continue to increase outsourcing as needed. "We had good discussions about that language," Kight said. "That was deemed satisfactory to us, the current language. With some process improvements made at (the union's) request, we've made proposals that don't change that."

So far, IAM leaders have not commented publicly on the offer, except to say that it is 300 pages long and they are "reviewing it line by line to see all changes and how they impact our members."

The company's plan to cease negotiating six days before the contract vote is an unusual one, since contract negotiations often result in last-minute settlements, as a ticking clock tends to bring out the compromise in people. Still, Kight rejected a reporter's suggestion that the company is "going around the union" saying "We have responded in very significant and substantial ways to what they have proposed to us."

In conversations with executives, employees have asked for time to consider a final offer, he said, noting: "As leaders it is not only our right, but also our obligation, to talk to our employees."

In an interview on Wednesday, Mark Blondin, lead negotiator for the IAM, has said the tactic of ending negotiations reflects a corporate arrogance. "Our union believes in the bargaining process, where two parties sit at the table and hammer things out," he said.

While the 11% increase is more than the earlier 9% offer, it is less than the 13% the IAM had sought.

Outsourcing remains a sticking point. Blondin said on Wednesday that the IAM would be willing to allow existing outsourcing to remain in place, but wants the right to retain the jobs it currently has. "We have said we don't want changes, but we want to be involved in the process of keeping work in-house for the people in this community," he said.

Three years ago, when the IAM struck the aircraft maker for four weeks, outsourcing was a key issue. According to aviation consultant Scott Hamilton, a month-long strike would force Boeing to defer revenue of about $3 billion, and to further delay delivery of its 787 aircraft. The plane is already more than a year behind the original schedule.