The Beat Goes On: Boeing, IAM, and Seattle

Last night my wife and I watched Dancing With The Stars. Although it was on Monday night, we taped it and watched it last night. Cher was a special judge, and it was fun to watch the dancers perform while dancing to Sonny and Cher hits and Cher hits. It really is amazing how many songs over the years she has sung that we have enjoyed. One of my favorites was “The Beat Goes On.” I am using this to describe the ongoing love triangle between the IAM, International Association of Machinists, Seattle, and Boeing. Boeing has operated out of the Pacific Northwest since 1916, but that could change.

Governor Inslee has just called for a special session of the legislature in Olympia, Washington to vote on a tax proposal that will help keep Boeing from moving to South Carolina.  This $10 billion tax proposal, according to Governor Inslee,  “is all about jobs, and transportation is included in that.” The proposal includes a tax incentive for Boeing through 2040. This will save the company about $8.6 billion. This is the State’s effort to keep the 777X, the new derivative of a very successful seller, in Washington State. As wonderful as this sounds for Boeing it is a drop in the bucket in comparison to the labor costs associated with the IAM and the constant threat of a work stoppage. The Boeing Company is tired of worrying about work stoppages when it is trying to deliver its product to its customer.

This brings us to the other part of the love triangle. Boeing currently has an extended contract with the IAM to ensure it will not strike between now and 2016, which was unprecedented.  However, the company has just taken another proposal to the union that would keep the 777X work in the Seattle area. This is another huge change, and hit to the labor movement, that signals changing times.

According to the Columbian this morning the terms of the contract has a short-term lucrative nature for the employees, and a long-term benefit for the company. In the short-term there is the $10,000 signing bonus. Each Boeing employee will receive the money within a month if they sign the contract. This will appeal to the new young employees. However, there is also a “generous buyout plan for any worker 58 or older,” which will impact a huge amount of the employee base. The last time Boeing offered this kind of deal hundreds of employees took it. It so devastated human capital that the company has not offered it again, at least until now. I predict that many of the older employees will take the buyout, which will cost the company up front. But over the long-term the savings will be huge.

However, the biggest savings, and the biggest hit to the union, will be the big cuts in the pension. “Traditional pension accruals will stop, to be replaced with an alternative company-funded retirement savings plan.” The new contract will also span eight years and will start in 2016. This means than from 2013 to 2024 there will not be a threat of strike. Good for the company, good for the state, and good for the employee.

Something I did not know is that the IAM is the last Boeing union with a traditional pension. One employee described this company’s strategy as, “offer a huge signing bonus to entice younger members who perhaps aren’t thinking of staying with the company their entire work lives. And using the golden handshake early retirement package to swing the votes of those planning to retire in the next few years.” This way the company will save money and create bigger profit.

The question is what’s at stake? What happens if the IAM says mess with my benefits and we strike, which has been the position in the past? As a former employee of the Boeing Company I went through three strikes, two as an IAM member, and one as a manager. As an IAM member, I did not believe in striking, but I believed more strongly in not crossing a picket line. I would not be a scab. So I walked the picket line, held a sign, and had fun. As a manager I did cross the line, I had to, but had a great time learning how to run a machine, and pump coolant out of machines. In every case, the company attempted to change the pension system or reduce benefits. This always led to a strike.

Now it is different. South Carolina is the company’s ace in the hole. The playing field has changed, and the IAM will need to take a different stance. The Dreamliner, 787, is being built in both Seattle and Charleston. The South Carolina facility is up and running, and the Boeing Company could very easily build the 777X there. This would mean either transferring employees from Seattle to South Carolina, which may not be possible because of company policies, or it may hire all new employees on the East coast. In either situation the IAM will lose dues paying members, and the State of Washington will lose its tax base. The times they are a changing.

The IAM is fighting a losing battle when it comes to pensions. I think the writing is on the wall, and if the rank and file ignore this they will go the way a Babylon. If the rank and file don’t ratify this contract, the 777X will be built somewhere else. Now is the time for the IAM to change it strategy. It needs to focus more on working conditions, employee development, and force the company to provide training for managers. Some of Boeing’s managers are the worst in the industry.

I am not saying the IAM should stop fighting to maintain good medical benefits for its members, I just think they need to be more realistic. Abraham Maslow’s hierarchy of needs applies here. The physiological and safety needs have been met. The wages of the members are pretty high, compared to other institutions, and the working conditions are good too, but the ability to work in teams still needs work, social, and education of its workforce, esteem, still need work. By focusing in these areas the IAM can helps its members self-actualize.

The State of Washington is going to pass the $10 billion bill that will include tax breaks for Boeing. I have no doubt of that. However, if the IAM does not ratify this new offer, I am positive that ten years, twenty year, whatever it takes, the Boeing Company will be known as a South Carolina company and not a Washington State company.

The Beat Goes On! Laddie Daddie Dee, Laddie Daddie Die.

And that is my thought for the day!

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