Boeing Strike May Be Inevitable - TheStreet

Finally,

Boeing

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and the International Association Machinists are involved in down-to-the-wire negotiations, with a strike threat looming if a deal is not made.

But it already may be too late. Many IAM members have made it clear they want to strike, and it will be difficult for union leaders to resist, even if Boeing offers a better deal than the one that was soundly rejected in a contract vote on Wednesday.

Talks are underway at a hotel in Orlando, Fla., where IAM leaders are attending a scheduled convention. Included is IAM President Tom Buffenbarger, who would have to approve an agreement.

Negotiators for the two sides arrived Thursday from Seattle, so Friday is the first full day being devoted to resolving the impasse. For Boeing to avoid a strike, it must improve upon the "last and final" offer it made a week ago -- six days before a scheduled contract vote.

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The strike deadline is midnight Pacific time, or Saturday at 3 a.m. EDT. IAM members have already approved a work stoppage, so union negotiators now have the responsibility to either reject Boeing's offer or to seek another vote if a new offer is forthcoming.

On Wednesday, 87% of the voters backed a strike, while 80% rejected the contract offer. The IAM constitution requires separate votes on the two issues.

At a raucous, hostile meeting late Wednesday, union leaders were booed when they announced they had agreed to keep talking for 48 hours, at the behest of federal mediators and Washington Gov. Chris Gregoire.

In email messages to members on Thursday, union negotiators wrote: "We understand many members are upset over the decision to extend the contract by 48 hours. We've heard your reaction since last night and listened over the last year."

The negotiators said the company had to "bring forward not only a good offer, but an exceptional one that addresses all the issues you identified. If not, then so be it, we hit the bricks for as long as it takes."

In the message, the committee said Boeing "had five days to invite the union back to the table after they presented their last, best and final offer on August 28th. You finally have them where they should have been days ago."

Boeing's initial strategy to close off talks six days before the contract expired appears to have been flawed, because it eliminated the opportunity to negotiate against a deadline. Strike deadlines tend to encourage compromise. Now, that mistake is being addressed.

In truth, the two sides are not that far apart on financial issues, said Bank of America analyst Harry Nourse in a recent report. Boeing has offered an 11% raise over three years, plus sweeteners that average about $34,000 for each worker, while the union is seeking a 13% raise. It's not difficult to imagine a compromise between an 11% raise and a 13% raise, but pension and health-care benefits are also in dispute.

Outsourcing is a crucial issue, just as it was before a four-week strike in 2005. The union wants to be involved in decisions regarding future outsourcing at a company that already sends about 70% of its aircraft manufacturing outside the company.

"The IAM is concerned that thousands of jobs could be lost over the next decade when Boeing develops successors to the popular 737 and 777 using outsourced suppliers," wrote FTN Midwest analyst Mike Derchin, in a recent report.

Derchin has a neutral rating on Boeing stock. On Friday, Boeing shares were trading down 1.7% at $61.95. The shares began the trading week on Tuesday at $67.