Boeing Co. today presented what it called its final contract offer to Machinists as a top executive warned that a strike would be devastating.
SEATTLE – Boeing Co. today presented what it called its final contract offer to Machinists as a top executive warned that a strike would be devastating.
“I just cannot emphasize enough what a strike would mean to us because we would absolutely be walking away form our commitments to our customers,” said Alan Mulally, head of Boeing’s commercial airplanes division. “There’s just no way we would recover.”
If the union members vote to strike, Mulally said the company would have no choice but to slowly shut down operations. And he added that customers have never been more clear such a disruption could cause them to choose a competing airplane maker — notably European archrival Airbus SAS.
“Clearly a strike would be devastating to the Boeing company and everybody associated with the Boeing company,” Mulally told a news conference at company offices in suburban Renton.
The final offer, which came as union officials warned that a strike might be looming, aims to answer a key union concern with a 10 percent increase in pension payouts. But it otherwise changes little from Boeing’s last offer.
“We heard what the union was saying about pensions,” Boeing spokesman Charles Bickers said.
The Seattle-based Machinists Lodge 751, which represents workers who assemble commercial airplanes, said in a statement that it had received the three-year offer and was analyzing it before responding.
Union leaders had previously cautioned that the two sides remained far apart. However, the union said a major sticking point was pensions, so it wasn’t immediately clear whether the sweetened pension deal would bring the two sides closer together.
“Pension, health care and job security. It hasn’t changed for us from the beginning. Those are still the top issues,” Machinists spokeswoman Connie Kelliher said earlier Tuesday.
Kelliher didn’t immediately return calls seeking comment after the final offer was released. Union members will vote on the offer Thursday, with the current contract set to expire Friday.
The fierce round of final negotiations occurs as Boeing is enjoying a strong rebound in its commercial airplanes division, giving the union a burst of confidence in talks.
Chicago-based Boeing is striving to beat Airbus SAS on new commercial jet orders for the first time since 2000. Boeing had racked up 529 orders through the end of July, compared with 299 orders for Airbus.
Airbus is ahead on deliveries so far, with 216 planes as of the end of July, compared with 179 for Boeing. Boeing expects to deliver 320 airplanes this year, and Airbus expects to deliver 360.
For about 17,500 affected Machinists in the Puget Sound area and Gresham, Ore., the offer increases lump-sum payouts to $6,000 over two years. That total could increase to a maximum of $9,000 if employees choose to roll the money into a retirement plan.
The company also added a 2.5 percent wage increase in the third year of the contract.
In addition, Boeing is offering an incentive pay program that would provide five days of pay to Oregon and Washington workers if the company meets financial targets and up to 15 days’ worth if the targets are exceeded. But it has dropped a $1,000 payout that was meant to jump-start that program, in exchange for increasing the lump-sum payouts.
Cost-of-living provisions would boost base wages by about 1 percent in each year of the contract.
For about 900 Machinists workers in Wichita, Kan., the company is offering a one-time payout of $2,800, which would increase to $4,200 if any employee chose to deposit that money in the Boeing 401(k)-type retirement account.
Machinists Lodge 751 is negotiating for employees in all three areas, but certain terms of the contract differ based on location. Workers represented in the talks now receive an average of $59,000 a year. The company said they would earn about $62,500 a year by the end of the new contract, excluding overtime and other extra payouts.
The company also said it would offer two health plans with the option of no premium, though premiums would increase for most health care plans. Puget Sound-area workers could pay as much as $210 a month for family coverage under the proposal.
Boeing is offering workers a pension of $66 per month for every year worked, up from $60 currently.
Bickers said Boeing continues to shoulder most of worker health care costs, and defended the company’s retirement package as one of the best in the industry.
Analyst Richard Aboulafia with the Teal Group said union workers could expect to get other concessions but should expect a tough fight over pensions. That’s because pensions represent a huge fixed cost that the company can’t scale back in a downturn.
“I think they’ve found the one area that management cannot afford to give in to, just for the long-term health of the company,” he said.
Still, Aboulafia said the union is in a strong position since Boeing cannot afford a long-term strike that would disrupt airplane production just as business is picking up.