Boeing’s global sights dimming
A dozen Boeing Co. machinists huddled over an oil-drum fire in the chilly morning drizzle, hooting as white trucks periodically cruised past them and into the gates of the massive airplane assembly plant.
Belonging to a North Carolina contractor, the trucks carried parts for Boeing’s new 787 Dreamliner -- which would be under construction inside were the union machinists not hurtling catcalls outside, locked in a seven-week-old strike that some estimate is costing Boeing $100 million a day.
The trucks symbolize a revolution underway in American aircraft manufacturing that is at the heart of the Boeing contract dispute: outsourcing. Components from New Breed Inc.'s 100,000-square-foot warehouse nearby are ferried straight to the assembly line, bypassing Boeing workers who for generations have stockpiled, inventoried and transported aircraft parts at comfortable union wages.
The aerospace company over the last few years had turned commercial aircraft manufacturing on its head by farming out much of the super-efficient 787. The Dreamliner’s wings are built by Mitsubishi Corp. in Japan, its doors by Latecoere in France. Fuselage sections are manufactured by a U.S.-Italian team in South Carolina. Little but the plane’s final assembly takes place in Everett, a suburb of Seattle -- long known as Jet City. Now, Boeing wants to outsource some of the union jobs still left here, hiring contractors to handle more warehousing, forklift operations, materials processing and hazardous waste disposal.
The result is a standoff between two of the nation’s strongest unions and one of its biggest exporters.
With talks resuming before a federal mediator this week, the strike has cost Boeing 38% of its third-quarter profits and left 27,000 machinists out of work in the middle of an economic downturn. Some analysts are predicting the dispute could drag on for another month -- or more. Boeing’s 21,000 engineers, who are to launch their own contract negotiations this week, said they could easily become deadlocked on the same outsourcing issue.
For Boeing, what is at stake is the ability to remain globally competitive at a time when Airbus and a growing number of smaller manufacturers are gaining traction.
For the workers, it is the fear of slowly losing the union jobs that have offered high wages, excellent retirement, three trips a year to the dentist and the promise of work for their children and grandchildren.
“I’m basically going to lose my job if they do this,” said Jacoba Widener, 52, who earns $28 an hour in a Boeing tool room, which could be staffed by contractors under the company’s proposed new contract.
“If we let these jobs go, what’s going to happen next? What about our future?” said Robin Goetz, 52, an electrician on the Boeing 767. “It has to do with integrity. It has to do with pride in what you do.”
Amid the negotiations, Boeing officials have issued dark warnings that Seattle could become an “aerospace rust belt” if the company is forced to push off for friendlier climes.
Several years ago, Boeing loosened its Seattle roots when it moved its headquarters to Chicago and announced it considered itself a global company whose markets, manufacture, investors and employees would be global as well.
The 787 has been the test case. By bringing in partners from around the world to participate in design and manufacturing, Boeing was able to share millions of dollars in development costs and to negotiate sales contracts with foreign governments, which made it clear they were not interested in buying if they weren’t involved in the manufacturing.
But the International Assn. of Machinists and the Society of Professional Engineering Employees in Aerospace have not been willing to sit quietly as jobs go to lower-paid engineers in Russia and welders in Japan.
Over the years, the unions rebelled against changes to their healthcare and retirement benefits. The machinists have walked out three times since 1995; the engineers went on strike in 2000.
“That’s a pretty bad record,” Boeing spokesman Tim Healy said. “And strikes do disappoint customers. Every year you’re in a strike, you’re telling them their new airplane is going to be delayed -- it’s a hard conversation to have, and we’ve had a bit too much practice at it.”
The Dreamliner was 14 months behind schedule before the strike began Sept. 6. Now, with a backlog of more than 3,725 planes of all types, Boeing officials admit there is a strong need to settle the strike. “It is both frustrating and disappointing to be in a position where we are not meeting our commitments to our customers,” Chief Executive Jim McNerney told stock analysts and reporters last week.
Whatever happens, no one is expecting an immediate Boeing exodus from Seattle. The company’s infrastructure in the Puget Sound region is massive, and state officials invested millions in roadway improvements and other incentives to assure that assembly of the 787 would remain here.
Some experts, however, think Boeing ultimately will transfer more of its manufacturing and assembly, if not overseas, then to states with weaker union laws.
“It used to be more about the threat, but I think we’ve hit the tipping point. The right-to-work states and all the incentives those states offer is just too strong,” aerospace analyst Richard Aboulafia said.
According to the engineers and machinists, most of the delays on the 787 are because of problems with the new suppliers.
“They’re saying it takes $10 to create this part built by Boeing, and $7 if it’s built by somebody else,” said Ray Goforth, executive director of the engineers union. “But they haven’t added in the fact that 50% of [those parts] aren’t up to spec and have to be reworked. That means delays.
“And if there’s a problem, you may not be able to find the engineer who did it because the company that gave it to you for $7 actually subcontracted out to somebody else.”
Goforth said Boeing had whittled away its reservoir of staff expertise, so that “when something comes up, they’re going to have absolutely no reliable way to reverse-engineer it. . . . This is terrifying.”
Yet the company would argue that building next-generation planes like the 787 requires not only an injection of outside development capital, but also outside expertise.
“Take composites: This is a huge, huge change in the way airplanes are built, moving from aluminum as the dominant technology for the skin of the airplane to composites. Boeing doesn’t have the same experience with composites. As it turns out, there is a fair amount of experience over in Japan,” said Richard L. Nolan, management professor at the University of Washington and a former Boeing employee.
The move to outsourcing, he said, “is not just an issue of low-cost labor. It’s tapping into a global workforce, a global market and building strategies that will allow you to effectively compete.”
A way to streamline
The stumbling block in the machinists’ strike is over whether Boeing can go outside the union for even more supply jobs similar to those held by New Breed employees on the 787 program.
The company sees more outsourcing as a way to streamline its operations.
“In the past, parts might come in and are delivered to a central receiving area run by machinists. They take them to a landing dock, then a machinist would drive them to inventory control, log it in, and another machinist would take and deliver it to the factory line,” Healy said. “The ultimate goal we want is point of use: The supplier brings in the parts when needed to the factory line, to the mechanic or machinist installing the part.”
But for union members, it’s a slippery slope. Pretty soon, they say, lower-paid contractors will be doing more and more of the work -- and the Boeing machinists will be unemployed.
“We helped build this company. When my children were little, I was here 11 hours a day. I was here Saturdays, I was here Sundays. I missed a lot of stuff my kids did,” Goetz said.
Now she’s being asked to write a detailed description of how she does her job. She fears what comes next. “They’re basically going to try to train just about anybody to come in and do our jobs,” she said. “That’s not right.”