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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 14, 2013 at 10:23 AM

The Boeing vote: Morning-after reflections

A cynic might say that Boeing has the International Association of Machinists right where it wants them. The company came to Washington first to build the new 777X. Workers voted down the requested contract extension. So if the new airplane is built elsewhere, it is the union’s fault.

But last night’s vote and the circumstances surrounding it are filled with shades of gray.

Boeing is operating as a multinational company in a “shareholder value” environment created since the 1980s and in a competitive world. Thus, record profits and high executive compensation are not at odds with trying to drive down costs, including — especially — for labor. They go hand-in-hand. While Boeing benefits from government subsidies and other “rents,” it worries about rivals that will emerge from China and Brazil in future years.

Executives are not unmindful of the value of the Puget Sound aerospace cluster and the high-skilled workers that saved it from the outsourced disasters of the Dreamliner. That’s why the company would rather built the 777X here, but not at any price.

They also operate in a quick-step world. Everybody knew a decision on where to make the new airplane was coming. State officials and union leaders seemed to understand the need for a speedy process.

But this is not the culture of organized labor. A wide majority of workers saw an ultimatum, not a negotiation. In their culture, an existing contract is not suddenly reopened and members given a week to take or leave a seemingly take-it-or-leave-it offer.

Especially in a time of historic inequality, when 40 percent of working Americans make $20,000 a year or less, these union workers resent being asked to give back gains it took decades of collective bargaining to achieve. Especially galling was potential loss of pensions in favor of inferior 401(k)s while executive retirement packages are princely.

When the United Auto Workers accepted repeated givebacks, it was because the Big Three were in desperate shape. Boeing’s situation is quite the opposite. In any event, building airliners isn’t the same as making cars.

“Labor peace” works both ways. Union members I spoke with said the vote might have gone Boeing’s way if the company had not made what they saw as extreme demands when it is also booking record profits and a healthy stock price. To a union member, a contract is a solemn compact, not a temporary set of goals to be changed on a whim.

Boeing could have used some of its hefty cash holdings to reinvest in its skilled human capital. The company could have made a more nuanced offer, perhaps moving in slower steps to wean members off pensions and change seniority pay over a longer time-frame. Executives could have accepted some austerity themselves as an example. They could have given the union more time.

It is difficult to see that the Machinists have much leverage, however proud they are for making a stand. As hard as it is for an outsider to understand, they are also deeply proud of their work, the airplanes that lace the world in comfort and safety. For these workers, there’s no dissonance between cursing the so-and-sos in the executive suite and being profoundly attached to Boeing.

I doubt Boeing’s offer was an opening in a negotiation.

The deal always carried serious questions. One concerned the number of jobs that the 777X would actually ensure. Robots are already at work on the line in Everett. More automation should be expected. Another: Would Boeing feel empowered to swoop in with another sudden demand that changed the contract.

Now the size and scope of Washington’s aerospace and manufacturing future have become much more murky.

We have one of the best aerospace clusters in the world, with unparalleled strengths. In the larger economy, it saved us from the worst of the Great Recession — fixing the 787 helped — and provides a huge cohort of well-paid blue-collar jobs. It allows the state to turn in some of the best export levels in the nation.

Yet it is a high-skilled, high-value, relatively high cost asset in a nation, and world, with surplus labor and governments willing to do anything to attract good jobs.

However the vote went Wednesday, it was going to be a historic turning point.

The morning after, it mostly points to tragedy when the back orders and existing contracts run out.

0 Comments | More in Aerospace/Boeing | Topics: 777X, Machinists vote

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