Boeing: Labor Crises Just Keep Coming

SEATTLE ( TheStreet) -- For a successful company, Boeing ( BA) sure has a lot of labor problems.

The sprawling aerospace company is facing a strike by 2,500 defense workers and International Association of Machinists members in St. Louis, just two weeks after the conclusion of a month-long strike by 1,900 defense workers and United Auto Workers members in Long Beach, Calif. In the fall of 2008, about 27,000 IAM commercial aviation workers in Seattle struck the company for 57 days.
Boeing
Boeing F/A-18

In all three negotiations, pension and benefit issues have been issues -- in particular, Boeing's desire to replace defined benefit pension plans with 401K plans for future employees. In the case of the Seattle strike, Boeing withdrew the pension change from its final offer.

Boeing makes commercial aircraft in Washington, C-17 freighters in Long Beach, and F-15 and F-18 fighter jets in St. Louis.

Mark Blondin, the IAM's national aerospace coordinator, said Boeing is "looking for a fight at every turn" as it aggressively "tries to strip away medical and pension benefits for future hires and allows subcontractors to come in and take work away." At the same time, in contracts with Boeing suppliers such as Spirit AeroSystems ( SPR) and Triumph Group ( TGI), pension plans are preserved, he said.

"The leadership at Boeing has made the decision they want to take the aerospace industry in the U.S. and cut it down," Blondin said. "They have made the decision they would like to be non-union, long-term." Boeing CEO Jim McNerney has said repeatedly that a key reason to build another 787 production line in Charleston, S.C. is to minimize the risk from labor disruptions in Everett, Wash.

Boeing spokesman Tim Healy said it is important to remember that "the success of a supplier partner depends, in the end, on the successful business of the customer, the airplane manufacturer." Boeing, he said, "must be competitive, not only today but also 20 years in the future" when it will almost certainly face competition from lower-cost foreign manufacturers in developing countries. He said Boeing sought to resolve pension and health care issues in talks with the IAM in 2009, just before the final decision to move some production to Charleston.

Unions also play a role in shaping the conflicts, according to Jonathan Cutler, a professor of American studies and of sociology at Wesleyan University who said successful companies are in fact more likely than unsuccessful ones to face labor resistance.

"The way the contemporary labor movement works, the labor union winds up pretty dependent on the employer," Cutler said. "When a company is hemorrhaging, as the auto industry was, the labor movement takes the approach that it doesn't want to kill the goose that laid the golden egg.

"A healthy company will face labor unrest, because the union feels that the company is strong enough to withstand and meet its demands, so it will be more strident with a stronger company," Cutler said. "What drives the pace of the labor movement is leverage. At a place like Boeing, where the contracts with customers are relatively strong, the unions have leverage."

Boeing has also been aggressive, Cutler said. "They feel there is little sign of union victories across America and they are not in a mood to take union victories." In particular, Boeing has taken advantage of the U.S. labor movement's great weakness, a failure to organize in the South to build new production in Charleston.

"Leaving an area largely unorganized means you can still work in the U.S. but be in a union-free environment," Cutler said. "When we talk about the dynamics of capital mobility and the impact of globalization, some of the same dynamics are in effect in the American South."

In St. Louis, a city with a long industrial heritage, a strike is possible as soon as Monday, June 28, after mediated talks early this week failed to achieve a breakthrough. Earlier this month, workers approved a strike in a 1619-459 vote. The strike date had been Friday, but now a second strike vote is scheduled for Sunday.

Even after last-minute negotiations, the critical issue remains Boeing's desire to move future employees from a defined benefit pension to a 401K plan. Defined benefit pension plans are important to the IAM; at United ( UAUA), IAM members managed to preserve their defined benefit, union-administered pension plan through the carrier's bankruptcy and are the only front-line employees to have a defined benefit plan.

On its Web site, IAM Local 837 posted a notice to members on Wednesday, saying it called for a second vote "so you can reinforce your decision to strike" after Boeing made two minor contract changes in the mediated talks and "tried to chip away at our strength with intimidation tactics."

The union said the slightly revised contract offer would "pit father against son, mother against daughter, and union brother against union sister down the road." It said Boeing's tactic is to "propose takeaways aimed at specific groups and hope the majority will vote to accept them."

Boeing spokesman Paul Guse said the company is "pleased our union-represented employees have another opportunity to voice their opinion on this contract." He said the company made the two contract adjustments in response to member concerns. Some members apparently pressed for a second vote.

Analyst Scott Hamilton of Leeham Co. said it is not out of the question that Boeing would consider moving defense work to its facility in San Antonio, Texas. "If I were Jim McNerney in Chicago, I'd certainly be looking at anyplace I could move," he said.

-- Written by Ted Reed in Charlotte, N.C .

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