SEATTLE — The Machinists union announced Saturday morning that Boeing made a new contract offer with a higher wage increase and other incentives in an attempt to end the strike that has paralyzed the company for five weeks.
The wage increase comes very close to the union’s initial demand for a 40% hike over four years.
The union has not recommended accepting or rejecting the offer but told its members it is “worthy of your consideration.” A new vote that could end the strike is set for Wednesday.
In an interview Saturday, Jon Holden, president of International Association of Machinists and Aerospace Workers District 751, made clear he thinks this may be the best contract the union can get.
“It’s our job to get the best agreement that we can. And that’s what we achieved,” Holden said. “There’s a lot of positive things here … it would be irresponsible of us not to place it in front of our members.”
What’s in the new offer
The proposal offers a 35% general wage increase over four years, up from 30% in a previous Boeing offer that the union did not put to a vote.
With increases of 12%, 8%, 8% and 7% compounding each successive year, that equates to a 39.8% wage increase at the end of the four years.
That’s not including two other wage hikes already in the contract: the annual cost-of-living increases and the 50-cents-per-hour bumps in wages every six months for those not at the maximum pay grade.
“It should be safe to say that our goal of over 40% wage growth during the life of the agreement has been achieved,” the union stated to its members.
In addition, the annual bonus, which has been set to vary between zero percent and 6%, will be guaranteed to be no less than 4% of total pay for the year.
The new offer does not restore the traditional pension that Boeing took away 10 years ago, which many Machinists have demanded.
“We weren’t able to achieve that. I understand those that have wanted their pension restored. The company just have not moved on that issue,” said Holden. “That’s the reason why we’re not recommending [the offer].”
Instead of restoring the defined-benefit pension, Boeing’s new proposal bumps up its increased contributions to the 401(k) retirement plan.
Boeing, in the prior proposal, offered an automatic company contribution of 4% of total annual pay plus a match of employee contributions up to an additional 8%. Now it’s added a one-time $5,000 contribution to the retirement plan of each machinist.
And the new proposal adds one detail that will boost the pension payout for those veteran machinists who have it.
If this offer is accepted, those who were at the company when the pension was frozen will get a monthly pension of $105 per year of service before 2014, up from $95 currently.
In the final change from the previous offer, the company has increased the bonus for ratifying the contract from $6,000 to $7,000.
The contract offer retains a commitment by Boeing to build any new airplane launched within the next four years in the Puget Sound region.
The agreement states that “final assembly, wing fabrication and assembly, major components (fabrication, interiors and wires), fabrication of parts and subassemblies, and delivery operations” will all be located in Boeing’s Puget Sound factories, with some work also going to its facility in Portland, Oregon.
Because it’s unlikely Boeing will launch an all-new airplane within four years, many machinists have dismissed this promise. However, Holden said the commitment has real significance.
“If the company launches the next airplane program in the next four years, then it comes here. And if they don’t, then we have that language in our agreement; we fight for it next time,” Holden said. “If they attempt to take it out, then we have the ability to strike next time as well.”
He added that such a commitment by Boeing to this region has never been previously achieved “without giving away billions of dollars in taxpayer funds.”
Boeing bleeding cash
The Machinists voted Sept. 12 to reject Boeing’s initial contract offer, which included a 25% wage increase, and a strike began that night.
Analysts estimate that just the inability to build airplanes over the past five weeks has already cost Boeing between $1 billion and $2 billion in cash flow.
“We look forward to our employees voting on the negotiated proposal,” Boeing said in a statement Saturday.
The pressure has been on the company to settle the strike.
Boeing is in a precarious financial position, loaded with more than $45 billion in net debt, losing money on its defense and space programs and in imminent risk of a credit rating downgrade to junk bond status that would significantly increase the cost of raising capital.
In an interview Friday, a former top executive at Boeing, speaking on the condition of anonymity to maintain relationships, said it had to be a priority for new CEO Kelly Ortberg to end the strike and start producing 737 MAXs again to bring in cash.
“When you’re burning $3 billion or $4 billion in cash a month, and you’re $50 to $60 billions in [gross] debt, you got to get this thing settled,” the former senior executive said. “Boeing can’t afford this strike. They really need to give the union whatever they want.”
Adam Pilarski, a veteran aviation industry analyst with consulting firm Avitas, said in an interview that “if the new leadership looks at how much money it will save versus agreeing to a little more, it should be a no-brainer.”
Boeing’s proposed settlement was precipitated by the intervention of acting U.S. Secretary of Labor Julie Su, who met separately with company and union negotiators this week.
Su was in Seattle on Monday and met with Ortberg and Holden. She returned Thursday night and met again Friday with the principal negotiators.
These indirect negotiations, back and forth through Su, culminated in a breakthrough agreement Friday afternoon to put the offer to a vote.
The union then worked through the evening and into the night to put together the details for its members, which it then released shortly after 7 a.m. Saturday.
Su “was engaged fully, and we appreciate the support we got to get some movement,” said Holden.
Holden said it’s up to the union members now to decide if the strike should end.
“I hope that people will see the value in this agreement,” he said. “But it’s in their hands. It’s their decision, not mine.”
“We’ll see if it gets across the finish line,” he added.
Pension and wages
The vote could come down to a fight of pension versus wages.
While some union members have said they prioritize a high wage increase over a restored pension plan, others have said they are determined to stay on the picket line until it is restored, despite Boeing’s past assertions that that is a nonstarter.
At a strike rally last week, union members several times broke into a chant of “pension, pension, pension.”
Steven Fierros, a 14-year Boeing veteran who works on the flight line in Everett, said after last week’s rally he would vote for a higher wage increase over a restored pension if it came down to it.
After Boeing and union leadership unveiled the new proposal Saturday, a worker who asked to remain anonymous to protect their job said they would vote to accept the deal because of the wage increase.
Rob Davis, an electrician in Everett who has worked at Boeing for 13 years, said Saturday he plans to vote against the latest offer because it does not restore the pension.
“It’s not what we want,” Davis said in an interview. “For me, I came to Boeing for the pension very specifically.”
The wage increase in the current offer is not a “life-changing experience,” he said, and not enough to bring him back to work.
Davis said he expects other union members will vote against the contract and continue to strike, but he knows that some people are feeling the financial strain after weeks without a paycheck or health care benefits.
“I’m willing to do what it takes to get the pension,” Davis said. “Come Wednesday, we’re going to find out how serious the membership is.”
