Boeing Strike Is On - IAM
September 6th, 2008
Breakdown in talks at Walt Disney Resort means some 27,000 machinists will put down their tools and walk out.
Despite extensive rounds of discussions to avert industrial action, the decision by the IAM to firstly postpone a walkout by 48 hours and now to carry out its threat to strike, a number of Boeing projects now hang in the balance.
Depending on the length of the strike, the immediate and near term risks are aimed squarely at the 777F and the 787 Dreamliner. The first two Boeing 777F’s are undergoing flight testing already, aiming for certification and delivery by the end of the year to launch customer Air France. Early 2009 deliveries of 777F’s to both Emirates and China Southern Airlines are almost certain to slip if the strike lasts more than a couple of weeks.
Boeing spokesman Tim Healy noted that “a protracted strike” would mean the 787 would also likely miss its fourth quarter target for first flight, having been delayed three times already.
“We’re extremely disappointed that the union is recommending that our employees reject what adds up to the best contract in the aerospace industry,” said Healy.
Image courtesy of Matt Cawby
One Boeing veteran was asked how long he thought the strike would last for.
“It could be a couple of days or three months. It depends on whether the company wants them to go back to work,” said Ed Zvonik.
In a brief statement, Boeing Commercial Airplanes President and CEO, Scott Carson had this to say:
“Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement. Unfortunately the differences were too great to close.“
The knock on effects of this new strike will also hit Boeing’s suppliers hard too. From seat vendors and interior suppliers to 787 partners and those in the vertical supply chain of other 7-series airplanes will mean that any slowdown in work, or potential layoffs could leave Boeing open to a raft of contractual penalties from these smaller companies.
Image courtesy of Boeing
Further, the recent commencement of production of the first 747-8F means that strike action over a prolonged period of time will almost certainly mean the target of service entry in the fourth quarter of 2009 may also be missed. Launch customer Cargolux was unavailable to comment on any impact on deliveries saying only that discussions with Boeing were “ongoing”.
Analysts at Macquarie Bank have already indicated in their guidance that a 30-day strike would result in an EPS loss of around $0.30 per share, based on first half revenues of $16.7bn.
Based on a 30-day stoppage, we estimate that the key 25 787 deliveries Boeing identified as its target for the end of 2009 could plummet to between just 5-10 airframes. This is based on first flight still occurring before the end of 2008 and a slight extension of the testing and certification process by several weeks into late October/early November 2009.
There have been widespread rumours that Boeing’s reluctance to amend its best and final offer during the last two days of talks relates to restoring some margin back into the 787 program. During the Farnborough Air Show in July, 787 VP and General Manager, Patrick Shanahan stated that he was “eating into margin he didn’t want to eat“. How much of that emerges to be true depends largely on when first flight eventually takes place, or indeed, whether it occurs before the end of 2008 as promised back in April.
With strike action firmly taking hold, the key question is what Boeing will now do to minimise disruption and bring it to a close while at the same time ensuring that the concerns of the machinists are met for future rounds of discussions.
Unhappy workers are unlikely to forget this episode in a hurry.
Sphere: Related Content
Entry Filed under: Aeroplane, Aerospace, Air Transport, Air Travel, Airlines, Airplane, Airplane Order, Airplanes, Airport, Airports, Aviation, Boeing, Boeing 737, Boeing 747-8, Boeing 747-8F, Boeing 747-8I, Boeing 767, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787 Orders, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Orders, Dreamliner, IAM, Travel
11 Comments Add your own
1. ARBE | September 6th, 2008 at 5:59 am
The unmitigated arrogance of the Boeing team towards the workers virtually guaranteed this strike. The misleading PR put out by Boeing was also a factor. take for example pensions. For over two decades, Boeing has subtly hidden takeaways in the pension plan documents. The unions on the other hand have not forced the issue due to lack of independent- outside- qualifed ERISA legal and actuarial help, while going up against the deep expert Boeing bench. Few realize that including a ratification bonus in the pension equation will reduce the pension payments for many who retire over 60 months after the bonus. That reduction may be on the order of 20 to 30/month ! Nor does the Company OR the Union Brass want to be upfront about the legal but hidden Boeing Pension benefits given to ex Boeing employees working full time for the local or international union - worth over $200,000 over their retired lifetime ! Few realize that the pension plan documents are a part of the contract, but to date have never been published in the open for all to see.
Some of the IAM have become aware, and are just now starting to demand full disclosure. Time will tell.
2. Doug McVitie | September 6th, 2008 at 11:02 am
I’ve never bought into the notion that Boeing is letting the strike happen to give it more time on the B787. But they could be letting it happen for a different reason — playing the long game in the knowledge that once the IAM is back at work (and that will likely be after two mortgage payments’ worth at the very outside), they will do so under terms and conditions which will apply through the next 11 financial quarters assuming there are no new negotiations mandated until Sep 2011.
This fits with Carson’s longer-term view of building up the B787 and assuring its widspread service-entry, whether at the end of 2009 or Q1/Q2 2010, focusing more on that than on the first flight. 904 aircraft is a hell of a backlog to be sitting on and you don’t want to start that production run on worker contract terms you as management consider disadvantgaeous to the proper financial running of the company in the long run.
Plus, Carson won’t reverse hmself on the outsourcing idea, and I’m sure the IAM knows this. The unions seem, quite reasonably, to want the health-care issues dealt with and when Boeing does that, I don’t see the strike having any further grounds.
Boeing management built up the B787 backlog, not the Boeing unions. So it’s up to the Boeing workforce now to deliver, at least once this latest fit of collective petulance is over.
3. TPE | September 6th, 2008 at 5:06 pm
I think Boeing will take a strike and not worry about it. The workers not so well, soe of us have saved money, but do they want to really burn money up for only a 3yr contract? I talked to a lot of fellow machinist that don’t want to use up savings for a strike too. I think Boeing could settle this contract raising 11%-13% and raising retirement to 100.00 with a bonus of 10K per person. You will not stop them from outsourcing, they are tired of a work force holding them hostage every 3 years, if it was your own company would you put up with a over greedy work force, our brothers showed they didn’t care about the Union and still walked off the job Thurs-Fri. That shows Boeing we are weak! When I say greedy, look at the teachers strike in Bellevue a 2.5 percent increase over 3 years! Don’t think you have Boeing by the Balls people, they are smart and we are going to cause outsourcing faster being on a strike. Your job will go away for the over greed now going on. Stop and think!
4. Chris Wallace | September 6th, 2008 at 6:00 pm
I too do not believe a long-term (90-120 day) strike will help Boeing, but a 30-day might give them some “free” breathing room to allow all five lines to catch-up with their suppliers (be it as simple as galleys/lavs or as complex as a completed 787 section).
As such, I think this will be a 30-day or less strike. Boeing and the IAM will glare at each other over a table for a week and then sit down and talk.
In terms of pay, pension contributions and health-care the 2008 contract looks better then the ratified 2005 and 2002 contracts. The IAM struck over the 2005 contract and almost struck over the 2002 contract, so something is carrying over from 2002 that the IAM do not like…
5. keesje | September 7th, 2008 at 11:07 pm
“Boeing spokesman Tim Healy noted that “a protracted strike” would mean the 787 would also likely miss its fourth quarter target for first flight, having been delayed three times already.”
Strong rumors on further delays were everywhere before the strike. Maybe Boeing will try to blame te delays on the strike now.
Hopefully the strike will be short, it is about time the 787 get airborne & crosses the Atlantic so we check out the plastic fantastic ourselves..
6. Aurora | September 8th, 2008 at 12:35 am
Next time guys, take a good long look at the 5-7 year labor agreement. Yes, I know, that’s not the way things are done, but having watched the U.S. manufacturing base and labor union membership errode over the last 30 years, perhaps it’s time to try something new? Trade the “right” to go on strike every three years for a little job security. Might just make it to retirement and leave a job for a twenty-something to inherit….
7. mike j | September 8th, 2008 at 9:27 am
Just think, if we had no Union, how cheap Boeing would be to us… I mean their very first offer for this contract was pathetic…
By the way (as an insider), the 787 wasn’t going to make the flight-test schedule EVEN IF we didn’t strike, it wasn’t close either…
Boeing WANTED a strike to get caught up on parts on all airplane lines and WANTED to blame the hourly-workers for rejecting a lousy contract offer… Boeing IS playing their typical games, despite whatever their PR spokespersons say… Do no be fooled by their PR statements!!!
8. mike j | September 8th, 2008 at 11:14 am
I work on 777 line, but I walked by 787 a lot and looked it over a lot.
It (just Line-Number 1) still had a very long ways to go to be “flight-ready” (Line-Number 2-3-4 were slightly longer behind).
My comment was just a good guess (just putting two and two together, as the phrase goes).
Without a strike, likely the 787 would “maybe-possibly” be flying by years-end at the earliest (but it looked like a long-shot to me), just a guess based on what I see and hear… and I did see that the original target was end of October, but that THAT date was later stated as “4th quarter” as the new general target.
I think someone stated that “…all the 787 delays are from Boeing Management’s mistakes, not the hourly worker…” which really is the truth.
If Boeing Management would’ve listened to even one ounce of common sense the 787 would be flying and delivered by now, and probably on Line-Number 50 intead of barely starting Line-Number 5 and nothing flying yet… (same goes with the part-shortages on 777 line where I work)(and by extention likely similar on all product-lines).
I’ll add another “putting two and two together” guess: there is a certain money equation of the amount saved on not paying labor-costs, and the amount for delivery-delay-costs (it’s a balancing act), then a little bit longer when enough money is saved to pay for a better contract offer, AND WHEN those two equation-lines cross is about when a new-better contract offer magically appears… generally this happens after 30 to 60 days (one to two months)(the longest strike was 69 days)…
In the meantime, the average worker suffers a bit from the uncertainty of it all…
Boeing could of course “break-the-union” utterly if they went for indefinite time period (an no doubt they could).
But then they would also hurt their reputation as a “world-class” or “best aerospace company”… and who would ever want to work for a company that is too cheap to pay a decent wage to its workers, especially a company who continually will DO all manner of trickery and intimidation and psychology to trick it’s workforce into cheaper and cheaper wages (oh, isn’t that the whole USA ? ).
Who would ever want to work for Boeing if they did that? (oh wait, they ARE doing it !)
Like I said a few blog comments earlier, just think how cheap Boeing would try to be without a Union… IF Boeing was totally fair there wouldn’t be a need for one.
IF they didn’t want a strike they could’ve very easily not got one, so by default means they did want one, and that’s that. The 787 was already NOT going to make it’s targets, and a strike is a very convenient way to direct blame away from Boeing Management.
9. roger | September 8th, 2008 at 1:32 pm
IAM workers have some of the best jobs in the country, yet they are whining about how cheap
Boeing is? Their first offer to make the best jobs in the country better was pathetic? Why do you guys keep working for such a cheap company with such a pathetic attitude towards its worker? Oh, its because you cant find better work somewhere else and the line for your job is 6 miles long.
10. TPE | September 9th, 2008 at 8:27 am
Don’t be stupid, look at the contract, then vote to keep you job!
11. Harrison | September 24th, 2008 at 2:26 am
At $4 million a week in strike pay (based on 27,000 strikers at $150/week) How long will the IAM be able to pay its brothers and sisters?
Leave a Comment
Some HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
Trackback this post | Subscribe to the comments via RSS Feed