787 Line 2: Countdown to Decision; Opportunities on Both Sides
It’s Monday, October 26, and the final countdown to a decision on where to put Boeing’s 787 Line 2 assembly site may come as early as this week. We understand the Boeing Board of Directors meets today or tomorrow; Boeing’s permit applications in Charleston (SC) to expand the facility there has a November 2 start date. Boeing management and the International Association of Machinists, at loggerheads for years, struggle to find an agreement that will tip the decision to Everett (WA).
We don’t need to recount the high drama of the last week, nor issues that we’ve already discussed.
Instead, we’re going to touch on some issues we’ve not covered, or at least recently, as well as some new things that have come up since last week.
Boeing and the IAM have a real opportunity to undertake a dramatic shift in its relationship. Behind the scenes, talks have been going on between the IAM 751 local and Boeing on other issues, where progress has been made and relations seem to have been inching forward. But these pale compared with siting Line 2 and the demands of each side.
To us, the resolution seems pretty straight-forward: Boeing wants a no-strike agreement for 10 years. The only way to effectively accomplish this is to extend the contract agreed to in 2008 from 2012, when it is amendable, to 2019. Extend the salary, benefits, pension and other terms and conditions. Extend the no-strike clause that is contained within the contract.
In return, put Line 2 in Everett.
The union has made no secret that it also wants more work brought back in-house for the 787-9. Since Boeing CEO Jim McNerney, former BCA CEO Scott Carson and Mike Denton, vice president of engineering, all have said Boeing will bring more 787-9 engineering and production in-house, it seems reasonable to us that now is the perfect time for Boeing to be specific on this point.
According to the story last week by Dominic Gates of The Seattle Times, the union wants a guarantee that the successor airplane to the 737 remains in Puget Sound as a condition to extending the contract. (We also presume the same is true for the successor to the 777, but Gates’ article doesn’t address this.) We know of a couple of other conditions reputed to be demanded by the IAM. We think these are unreasonable at this time and in these circumstances and only serve to muddy the waters and threaten an agreement.
The quid pro quo should be a straight-forward contract extension-for-Line 2, with the 787-9 issue tossed in. And you’re done.
If an agreement is reached as outlined above, we think this will go a long way toward repairing the hard feelings of contract negotiations in the recent past. But we also believe there is a good chance relations between Boeing and IAM 751 could improve under the leadership of BCA’s new CEO, Jim Albaugh, an engineer who understands engineering and production in a way that Scott Carson, for all his talents, never did.
After Albaugh’s appointment, we did some digging to learn about him, whom we had not followed during his tenure as the CEO of Boeing’s defense unit. One thing we found was that relations with IAM 837, the local there, seemed far better than that between BCA and 751.
There were no strikes by 837 during the eight years Albaugh was IDS CEO. It’s true that negotiations for the 2007 contract reached the point where a strike vote was taken (not an uncommon occurrence in contract negotiations) and approved by the 837 membership, but a settlement was reached before the deadline for a walkout.
The IAM 837 contract includes items that 751 has been seeking for years from BCA, without success, such as an incentive-based cost-efficiency program under which IAM 837 members share in the savings of cost benefits they suggest. Operational committees involving the IAM exist in St. Louis that 751 would like to see in the Puget Sound.
Although Albaugh is widely described as an aloof CEO who doesn’t get down into the nitty-gritty of contract negotiations, he met with IAM 751 and SPEEA, the engineers union at BCA, in the first week of his appointment as BCA CEO. Initial interaction was described by labor as encouraging.
Albaugh, as CEO of IDS, came to Renton for the roll-out of the 737-based P-8A Poseidon, praising 751 and SPEEA for their contributions to a smooth program that rolled the airplane out one time and on budget. Labor noted the long absence of such acknowledgment from Carson.
We think that given the opportunity–there’s that word again–Albaugh can effect a major change in management-labor relations at BCA.
Dominic Gates’ story last Thursday characterized the talks between Boeing and the IAM as deadlocked. We understand there have been additional contacts over the weekend (we’re not sure they can be truly characterizes as talks, however). We infer from this that the matter is still open.
We truly hope an agreement can be reached. We shudder to think what will happen if Boeing does put Line 2 in Charleston because of the labor issue–we opined on this last week. For The Boeing Co. as a whole, as well as its customers, the result would not be good. Boeing could well be put in a position of winning the battle but losing the war to the IAM’s guerilla activities, which in the end would be as damaging to the membership as it is to Boeing.
Both sides have a tremendous opportunity. Let’s hope neither one of them blows it.