7 Questions About Boeing: “You Wonder Whether or Not They’ll Go Flaccid and Come Back”

Following last night’s rejection of a new union contract by local members of the International Association of Machinists , we threw a few questions at Scott Hamilton, an Issaquah-based aviation industry analyst at Leeham News and Comment. Answers have been edited for length and clarity.

One machinist speculated last night that the reason Boeing was playing hardball with the IAM is because of leadership’s personal animus toward organized labor. Does Boeing CEO Jim McNerney really hate unions?

He does not like the unions. I’ve certainly used that phrase. He does not want to deal with unions. Take a look at going back to locate (787 work) to Charleston. I’ve been told that the main business case for putting it there is ... because of the union.

Is that financial or philosophical?

It’s both. Boeing clearly wants to cut the costs and unions add to the cost of doing business. Certainly here in Washington because Boeing has been here 100 years, and with that you have naturally contract layer after contract layer after contract layer. There’s the cost element. Then when you have a union, you just have the constraints on what you can do. So it’s philosophical and it’s cost.

Boeing’s labor policies during construction of the 787 were criticized when problems began cropping up with that airplane. Is this more of the same labor policy?

That’s apples and oranges, but in regard to the whole 787 program, it’s been the IAM and SPEEA (the engineer’s union) that saved Boeing’s bacon.

You had design issues, industrial partner issues. SPEEA had to come and do design to fix the problems and the IAM came in and put it together. On top of that it’s the IAM that provides the touch work on the 737 and 777 to keep planes rolling off the line, giving Boeing the cash flow to keep the company out of bankruptcy.

What is sad here is that, to a large degree, the unions aren’t getting the recognition and the respect and considerations for saving the company. But in the business world, it’s what have you done for me lately.

The Wall Street Journal is reporting that Boeing is already scouting for new locations to build the 777. Is this it for Boeing in Washington?

It depends. The fact that the vote went down last night does not automatically mean the 777X won’t be built here. There’s still an opportunity for parties to come back to the table. I’m not ready to throw in the towel at this point and say we’re going to lose this work.

What incentive does Boeing have to come back to the bargaining table?

From Boeing’s perspective, Everett is clearly the best place to build the 777X (given that that’s where the 777 is now built). It behooves both parties to come back to the bargaining table. Right now the union and company have gone back to their caves in their manhood battle. You wonder whether or not they’ll go flaccid and come back.

Local union leadership is praising the rejection, saying “ we preserved something sacred by rejecting the Boeing proposal.” Is this it for the union leadership that negotiated the contract?

This agreement was negotiated by national headquarters. There’s a civil war going on right now between the local and international. Local leadership got mugged in the process here. The question is, is the international going to double down and throw out the local leadership, or recognize they blew this and let the local salvage something out of this fiasco?

Was this a normal way of doing business, re: how much time Boeing gave for the legislature and the union to consider their terms?

The one week turnaround struck me as highly unusual. I think Boeing was trying to get this done before the Dubai Airshow next week, but that’s just speculation on my part.

I think it was put out to the legislature and the unions when Boeing and the IAM International had an agreement. I don’t know if it was delayed per se, but again, that’s just speculation.

 
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