Our thoughts on the Boeing-SPEEA “Best and Final” offers
For a few short moments we thought there were offers close enough to be reasonable middle ground to head off a strike between Boeing and its engineers’ union, SPEEA.
We’re looking at this from afar, figuratively and literally–we’re 5,000 miles from Seattle on our European, multi-stop trip. We don’t have access to the so-called “red line” contract proposals and, frankly, don’t have the time to read them even if we did. So to a large degree we’re reacting to press releases.
With these caveats, here’s our take:
Boeing conceded to SPEEA’s proposal on all but the pension fund, something we heard suggested to us in a telephone conversation we had a couple of days ago, even before we left Seattle for our trip. Boeing is determined to reduce pension costs. It’s stuck to its demand of ending the defined pension plan for new employees and transitioning them to a defined contribution plan.
We’ve always found this concept reasonable, with the devil in the details about the level of contribution. Defined benefit plans, in our view, are outdated approaches that have ROI assumptions that are ridiculous in the “new economy,” placing huge liabilities on companies.
Unions, of course, point out (and not without reason) that 401(k)-based pension plans are subject to the whims of the stock market and corporate executives get fully funded pension plans. There is, indeed, a certain inequity to executive treatment vs the rank-and-file and we’re not unsympathetic to the allegations of corporate management greed. The policy-making is stacked against labor with corporate boards packed by CEOs with hand-picked executives, and Boeing is no different in this regard.
But the defined pension plans structures now produce liabilities based on unrealistic ROI assumptions. SPEEA says Boeing’s pension fund is fully funded. Boeing counters that SPEEA is referring to ERISA calculations but under GAAP (Generally Accepted Account Practices), Boeing has billions in liabilities. It’s GAAP that shows up on the balance sheet and GAAP that Wall Street analysts focus on.
As we’ve watched the negotiations between Boeing and SPEEA progress over the last year, we agree with SPEEA that Boeing’s position has been dismissive. Mike Delaney, Boeing’s management front-man to the press, took an astounding (and we think, sophomoric) position that, in essence, said SPEEA members aren’t needed in the FAA review of the entire 787 development program. It’s been our observation that Delaney sometimes gets out ahead of himself and we think this is probably another example, but the damage was done with SPEEA over this silly statement.
But we also believe that both sides have been guilty of hyperbole and SPEEA’s press release today in response to the Boeing Best and Final is an extreme example. We certainly understand the need to fire up its membership and, to be honest, we firmly believe the negotiating team believes in its own rhetoric. (We also believe, and have said repeatedly, that Boeing has consistently misread the mood of its labor force, from IAM to SPEEA).
Bearing in mind that we haven’t seen the Red Line, here’s our Best and Final take:
Our view is that Boeing conceded everything SPEEA sought in its Best and Final offer, except Pensions. This is a big win for SPEEA. We don’t have any issue with new employees going to a 401(k) plan, if the defined contribution is reasonable.
SPEEA, with shadow support from IAM, is firm in wanting to protect the defined pension plan. We understand their reasoning but don’t agree with it.
We would have had less issue with the SPEEA press release rhetoric (even though we understand why it’s there) had SPEEA simply focused on the disagreement over the approach to pensions rather than engage in the hyperbole it did.
Assuming the Boeing Best and Final is what it’s press release says it is, we believe this to be a reasonable compromise, with both sides getting wins.