Boeing counts cost of strike action

US manufacturer begins to weigh up impact of month-long industrial dispute with machinists after settlement

The damaging month-long machinists strike that paralysed Boeing is over, but at what cost? Officially, the company says it will not know for some time – detailed analysis of the impact and the details of how to orchestrate its recovery only began, it says, on 22 September as the machinists voted to return to work.

Unofficially, however, the company already knows; deliveries of at least 30 aircraft hit immediately, a hefty series of penalty payments to customers that will now continue through the year in some cases, disruption throughout the supply chain and an expensive production process to crank back into life.

Total costs are unofficially, and probably conservatively, estimated at around $50 million all told. Then there is the serious question of how best to bring production back on line without the chaos that came in the wake of the even more damaging 69-day long machinists’ strike in 1995. The shut down was “orderly” and so, Boeing knows to its cost, must be the start-up. Parts and subassemblies for the lines at Everett and Renton were being stockpiled all over the world in some cases, and the strike ended just in time to prevent much more serious long-term production issues.

It is not only here that Boeing is learning lessons the hard way. In less than a month it must also sit down at the table and start talks with the Society of Professional Engineering Employees in Aerospace (SPEEA), the union representing around 17,700 Boeing engineers and technical employees in the Puget Sound area plus a further 800 in the drastically reduced workforce at Boeing Wichita.

With the gradual reduction in manual touch-labour jobs on the assembly line at Boeing over the past decade, the SPEEA headcount actually now exceeds that of the roughly 18,000 machinists who work for Boeing. The two groups have differing demands, and the SPEEA negotiations will reflect that. The International Association of Machinists and Aerospace Workers (IAM) walked out on 2 September mostly over arguments on pensions, health care insurance payments and job security.

The engineers within the SPEEA membership are paid an average of more than $20,000 more a year than the average machinist, while the SPEEA technicians earn almost $4,000 more a year on average. The SPEEA talks are therefore likely to focus on pay increases as well as keeping a tight rein on medical premiums, rather than greater pension benefits.

In the end, the machinists’ strike was largely settled over Boeing’s final agreement to increase its pension payments by just $4 a month for each year of service. This raised the agreed monthly pension to $70, and appears to be have been the straw that broke the camel’s back. Although it was less than the $80 targeted by the union, it was $4 more than Boeing’s best and final offer when the strike was called. Although the sum appears trifling, Boeing is well aware this $4 will translate into multi-billion pension liabilities downstream for the company that faces paying around $1.5 billion in this area in 2005 alone.

But Boeing is not alone in walking the tightrope between rising pension and healthcare costs on one side and, along with the rest of corporate America, is even more afraid of the shorter-term damage of prolonged strike action.

It is unclear if the strike caused any potential business to be switched to Airbus, but that extra $4 in all likelihood stopped most of the industry from ever finding out

GUY NORRIS/LOS ANGELES.

Source: Flight International