A tentative deal reached Wednesday between Boeing and the District 837 of the International Association of Machinists would offer buyouts to veteran union workers, lower wages for future hires and lock in a schedule of wage increases and bonuses for the next 7?½ years.
It is designed to make the endangered assembly lines in St. Louis more “competitive” — as both company and union put it — and boost Boeing’s chances of winning more work here.
Boeing officials had little to say ahead of Sunday’s vote, issuing only a brief statement pointing out the offer’s “attractive” wage and benefit provisions and saying “it will better position Boeing St. Louis to compete for critical future work.”
Union leaders did not return calls seeking comment — they spent Thursday in Boeing’s huge factories in north St. Louis County and St. Charles, Mo., talking with workers about the deal — but a message on the District 837 website said the deal was unanimously endorsed by the 12-member bargaining committee.
“The offer is a collective and balanced approach to the issues of all our members and the business needs of the company,” wrote District 837 President Gordon King.
But to be sure, it knocks down a peg on the compensation levels at one of the region’s premier blue-collar employers.
The deal sets up a two-tier wage structure, like those in many recent auto industry contracts. Workers hired at Boeing after March 1 in many job classifications would see their wages top out at levels 8 percent to 49 percent below the top wages earned by people on the payroll today, though a person familiar with the contract said they’d still exceed national averages for aerospace manufacturing. And workers will shoulder more health insurance costs in future years.
But those concessions, coupled with newly created buyout deals that could shrink Boeing’s workforce without messy layoffs, might be enough to help win more orders and thus prolong at least some of the union’s jobs.
That’s especially true on the F/A-18 Super Hornet program, which is set to end in 2016 unless the Pentagon or foreign militaries buy more.
The Super Hornet is being supplanted by Lockheed Martin’s more-advanced F-35 Joint Strike Fighter. Boeing and its allies are urging the Navy to buy more Super Hornets, and a key argument is the plane’s lower price tag. At about $52 million, the fighter’s “fly-away” cost is roughly half that of an F-35.
Lowering costs further strengthens that case, said Loren Thompson, a defense analyst with the Lexington Institute, a Washington-area think tank.
“The future of the Super Hornet production line depends in significant measure on the cost of the plane,” he said. “Labor is a major component of the final cost, and anything that can materially reduce labor costs could help.”
That will become especially important if, as expected, the 2015 Pentagon budget includes no money for new Super Hornets when it is unveiled in the coming week. That would push the funding fight into Congress, where Boeing will urge lawmakers to add money to the budget for more planes. At that point, every dollar will count.
But this contract isn’t just about the F/A-18.
Boeing hopes to lower costs to compete for future work on the Navy’s unmanned U-CLASS drone and the Air Force’s T-X trainer jet program. And, running through 2022, the deal is long enough to factor into the competition for the $55 billion Long-Range Strike Bomber program, which the Air Force hopes to award later this decade and build in the 2020s. A team-up of Boeing and Lockheed is favored by some experts to win that contract, and while Boeing has not said it would build the plane in St. Louis, industry-watchers say that’s a logical choice.
But for that to happen, Boeing needs to retain its skilled workforce of engineers, designers and, yes, union assembly line workers. And for that to happen, Thompson said, Boeing needs work to keep those people sharp in the interim.
“The biggest challenge Boeing faces is maintaining its engineering teams, its design capability and its factory-floor skills in the absence of government demand,” he said. “The costs of trying to maintain a major industrial facility are huge if they’re not covered by some ongoing production program.”
In other words, if Boeing’s St. Louis assembly lines go cold now, they may never heat up again.
Union leaders, in their letters to members, warn that layoffs are likely by year’s end if the deal doesn’t go through. And their sense of urgency is highlighted by the quick pace of talks on this deal. Formal negotiations began just last week, and a deal was announced Wednesday.