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The Wall Street Journal reports that Boeing Inc. (NYSE: BA) factory workers who belong to the International Association of Machinists and Aerospace Workers (IAM) have voted to strike by a wide margin. However, thanks to the intervention of a federal mediator, the two sides have 48 hours to try to work something out. I cannot tell whether they will be able to find common ground.
Eighty-seven percent of IAM's "26,800 machinists rejected a proposed three-year contract that would have given members raises and bonuses totaling $34,000," according to the Journal. Boeing offered each union member a $2,500 signing bonus only if "the contract was ratified on the first vote." IAM's decision not to ratify costs workers that bonus. Boeing proposed an "11% pay raise over the life of the contract, as well as boosting pensions by 14% to $80 a month for each year of service. [The contract would pay the average union member] roughly $65,000 a year before overtime that averages $10,000 a year or more," according to the Journal.
IAM wants a bigger raise, more pension contributions, and lower health care payments. As the Journal wrote, IAM wants "pay raises of at least 13% and a larger pension amount. It also wants Boeing to abandon plans to have workers take on a greater share of certain health-care costs."
Boeing has been trying to outsource more component manufacturing while retaining control of final aircraft assembly. This puts Boeing at odds with IAM long-term since more outsourcing means fewer IAM workers on Boeing's payroll. But with a backlog of almost 900 787s, Boeing will lose $100 million a day if IAM strikes, which gives IAM a strong short-term bargaining position.
If Boeing and IAM conclude that each will be better off with a contract settlement, then it might be possible to split the difference between their positions -- agreeing on, say, a 12% raise and finding a halfway point between their other differences.
Boeing needs to weigh the costs of a lengthy strike that could cost it billions against its desire to preserve its profit margins by capping its labor costs. IAM must assess whether the gains likely to emerge from a lengthy strike would be much better than Boeing's offer in mediation.
I think the next 48 hours offer both sides an opportunity. We'll see whether they take it.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
9-04-2008 @ 11:34AM
Bill Pruett said...
Once more union memberes at a plant making products vital to America's defence are trying to extort money from their employer. The Boeing union workers are embarking on a path which is guaranteed to push the company into seeking manufacturing capability outside the USA in order to maintain a reasonable level of return on investment for stockholders. When that happens the unions will squeal like pigs that their jobs are being "shipped overseas". Will the unions ever learn?