With money and jobs on the line, Boeing workers vote on critical labor contract

January 3, 2014 at 12:00 AM EDT
Thirty-thousand machinists employed by Boeing voted on a labor contract that will decide whether the company will build a new factory in Seattle or move to another state. Jeffrey Brown reviews what's at stake with Harley Shaiken of the University of California, Berkeley, and Richard Gritta of the University of Portland.
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JUDY WOODRUFF:  It’s a critical vote for a labor union, an aircraft company and possibly an entire region. 

Jeffrey Brown has the story. 

JEFFREY BROWN:  In November, machinist union workers at Boeing voted down a new contract extension.  Pensions were the most contested issue.  After Boeing offered several revisions, a new vote is taking place today, with results expected tonight. 

The stakes are high: thousands of jobs and the building of Boeing’s new 777X plane.  If the union approves the contract, Boeing says it will go ahead and build the plane in unionized factories in Washington State, the company’s historic manufacturing home.  If there’s another no-vote, Boeing says it may well go elsewhere.  And 22 other states responded to a solicitation from the company with proposals to build the new jet in their areas. 

Joining us now: Harley Shaiken, a professor at the University of California, Berkeley, who specializes in labor issues, and Richard Gritta, a professor of finance at the University of Portland, an expert on the airline industry. 

Well, Harley Shaiken, and start us off.  Explain the pension and other issues here and the dilemma for the union members voting on this.

HARLEY SHAIKEN, University of California, Berkeley:  Well, it’s a real dilemma.  This was a very tough context for the union, in that, as you mentioned, Boeing could have put this new production in many places. 

The fact that it may go to Seattle is an important gain long-term, possibly very important for unionized workers and for the machinists union itself.  But to do this, the union had to give certain critical concessions.  The most contentious is the pensions. 

The Boeing workers are going to be going from a traditional defined benefit pension plan to a 401(k).  It’s an older work force.  Almost half are over 50 years old.  They’re very worried about the security of that.  Also, the context in which the vote is taking place, I think, has contributed to some of the tensions, the fact that this was a record year for Boeing in terms of profitability, the fact the CEO had a $21 million paycheck, the fact that since the first vote, there had been a $10 billion share buy-back and a 51 percent increase in dividends.

All have played into the mix. 

JEFFREY BROWN:  All right, and, Richard Gritta, from the company perspective, Boeing clearly feels itself in a highly competitive situation, right?  Tell us about this particular plane and its importance. 

RICHARD GRITTA, University of Portland:  Well, the 777X is the new generation of the old 777.  And it holds anywhere from three 350 to 400 passengers.

So they are going the intermediate route to compete against Airbus.  But it’s been dog eat dog in this industry for a long time, Airbus taking the lead and kind of acing out Boeing, and then Boeing grabbing it back.  So it’s a very competitive industry.  And this pension situation, as mentioned, is critical.  The use of defined contribution plans is what Boeing wants to push with the union. 

Defined benefit plans are what really bankrupted General Motors.  So they can’t afford to risk the cash flow problems with this defined benefit program.  I think that’s the key issue, as has been pointed out. 

JEFFREY BROWN:  And let me just stay with you, Richard Gritta.  This question about moving to another state, how easy or difficult is something like that to do for Boeing? 

RICHARD GRITTA:  Well, it’s not easy, but it’s kind of an applied capital budgeting decision, are, the costs to move, to, say, Alabama or to North Carolina or Utah, which are right-to-work states, has to be weighed against the present value of the benefits, the lower wages that they would pay elsewhere and the fact that in non-union states, they could easily hire people that would be willing to go with a 401 traditional plan. 

JEFFREY BROWN:  So, Harley Shaiken, I gather that this is — the stakes are so high, the conflict is so difficult here, intense, that this has really split the union in some ways, the local vs. the international — the national and international. 

HARLEY SHAIKEN:  Well, I think that’s been overplayed in some important ways.  They have different perspectives. 

The international is looking at the long-term future of the industry, the long-term creation of jobs and a key technology that would go into Seattle with highly paid unionized workers, carbon fiber technology that could define the aircraft industry for decades to come. 

So the international has that long view.  On the local level, you have got many workers that are simply apprehensive.  They have seen what has happened in other industries.  They want to ensure that they get a fair shake right now. 

I don’t think it’s a rift.  I think that’s been overstated.  But I think there are differences of perspective that are very important going forward.  The irony here is, at the end of the day long-term, the machinists union and its members in Seattle could be in a stronger position when a defining product, the 777X, which is going to shape the industry for decades to come, a new technology and a very heavy investment, are all in Seattle in a unionized sector, and it puts a premium on both sides, the company and the union, working together to make this a very successful investment. 

JEFFREY BROWN:  Well, Richard Gritta, so what about the stakes for Washington State, for the entire region there, where Boeing does a lot, still does a lot of its manufacturing?  And what about the stakes for the company itself?  I mean, how much is it framing this as important to its future? 

RICHARD GRITTA:  Well, I think the framing it as highly important, especially because of the pension (INAUDIBLE) system.

But at stake are anywhere from 8,000 to 8,500 jobs immediately, and then some estimates as high as 20,000 for all the periphery companies that feed into Boeing.  So, this is huge.  Washington State has offered an $8.5 billion dollar tax incentive to keep the company there. 

They don’t want it to go.  But, of course, they’re bidding against Alabama, North Carolina, Utah, and some other states for the prize, which is where they’re going to build the carbon wings for this aircraft.  And it’s — they’re talking about a $1.2 million plant to do this. 

JEFFREY BROWN:  And, Harley Shaiken, what about — just in our last minute, what about the stakes for unions?  And I don’t mean just this union, but how do you fit this into kind of larger issues that you look at? 

HARLEY SHAIKEN:  Well, I think this is critical for unions more generally.  You have got three things coming together here, an iconic, profitable company, a strong union, and all the pressures of the global economy. 

There’s something in Seattle that is critical for Boeing going forward, which is a highly skilled, very capable work force.  You have got $8.7 billion in state incentives.  And you have got a work force that’s also very dedicated to the future of this company and this industry.  If both sides can bring this together, I think it will be a model of a high-wage, high-road route to competitiveness in a global economy. 

JEFFREY BROWN:  All right, well, as I said, we’re expecting to know more about this tonight.  We will keep watching.

Harley Shaiken, Richard Gritta, thank you both very much. 

HARLEY SHAIKEN:  Thank you. 

RICHARD GRITTA:  You’re welcome.