NEWS ANALYSIS : Strike at Boeing Aims for Impact Far Beyond U.S. : Aerospace: Machinists want jobs to stay at home, but management says it can’t close future deals without buying parts overseas.
A strike by about 34,000 Boeing Co. production workers that began Friday brings into sharp relief the way the workers’ job security is being impacted by trade, technology and the industrial policies of governments as far away as China and France.
The walkout against the world’s largest airplane builder occurred after members of the International Assn. of Machinists and Aerospace Workers voted 3-to-1 to reject the latest contract offer, which Boeing called “fair” and yet “reflecting the realities of our current business environment.”
Boeing was referring to slow sales in the jetliner business, with debt-heavy airlines happy to delay taking delivery of aircraft they’ve ordered. For that reason, the strike is unlikely to have a significant impact on Boeing’s long-term earnings, analysts said.
As for the striking workers, a top priority in the negotiations is not only to get a pay raise, but also to find a way to prevent Seattle-based Boeing from pushing more of what work exists to overseas subcontractors, so-called outsourcing. The walkout affects Boeing plants in Seattle; Portland, Ore., and Wichita, Kan.
“You can get all the wages and benefits you want,” said Bob Gregory, Boeing coordinator for the machinists union, “but if you don’t have a job, what is the use?”
Similar concerns are being mirrored in negotiations under way at McDonnell Douglas Corp.--whose Long Beach-based Douglas Aircraft Co. unit is the other major U.S. builder of commercial jets--and soon to begin at Lockheed Martin Corp.
The machinists union would like Boeing workers to be brought into management decisions on outsourcing and given a chance to show how the work might be done more cheaply in-house.
But Boeing has refused to negotiate on the issue, insisting outsourcing is a management prerogative. The company argues it needs the option of sourcing work overseas as one bargaining tool for securing aircraft orders.
“That’s part of the reality of doing business,” said Boeing spokesman Paul Binder, noting that 70% of Boeing airplanes sales now go to overseas customers.
A consortium of Japanese companies, for example, is building a major portion of Boeing’s latest widebody jet, the 777. An unwritten understanding is that Japan’s two large carriers will remain among Boeing’s largest customers.
China, regarded as the most important growth market, insists that Boeing buy plane parts in China if it wants to sell planes there.
In many cases, critics say, sourcing parts from developing countries actually raises rather than reduces production costs because those incoming parts are inferior.
“They [Boeing] reject so much stuff that if anybody looked into it, [the arrangement] would be considered a bribe,” said a consultant who has worked with Boeing but declined to be identified. “The stuff has to be totally reworked.”
Boeing, whose total employment has dropped to 105,000 from a peak of 165,000 in 1989, declined comment on any quality problems with subcontracted parts.
Overseas governments also affect wage negotiations. Boeing is being forced to take a harder line in wage talks in part because of stiff competition from Airbus Industrie, the European airplane manufacturer that continues to survive on subsidies from French, German and British governments.
“When Boeing was competing with McDonnell Douglas, it [wages] wasn’t as much of an issue because workers at McDonnell would be making the same,” said Bill Whitlow, analyst at Pacific Crest Securities, a Portland-based brokerage house. “With Airbus you face a company that doesn’t have the same pressures.”
Boeing production workers now average $20 an hour, and would get a $2-an-hour increase over three years, bringing the average annual salary to $46,000. They also would get lump-sum bonus payments averaging $3,400 over two years.
But workers objected to Boeing’s effort to make employees pay $45 a month for certain health benefits along with higher deductibles and co-payments, which they contend would cancel out a pay increase.
The machinists’ last strike nevertheless lasted 48 days.
