KOMPAS.com - Boeing Co. and leaders of its main union reached a tentative settlement that could end one of the biggest U.S. labor disputes in recent times but leave unresolved key questions about the government's right to determine where companies locate their plants.
Boeing's labor troubles took on political overtones in April when the National Labor Relations Board accused the jet maker of trying to illegally shift union work to a nonunion facility. That triggered outrage at the Obama Administration from the business community. Some accused it of interfering in basic business decisions at a fragile time for the economy.
The deal announced Wednesday between Chicago-based Boeing and the International Association of Machinists & Aerospace Workers, if ratified by union members, would help pave the way for a planned jump in production by the aerospace giant.
It would alleviate the threat of strikes that could derail ambitious sales plans for a retooled version of Boeing's best-selling 737 aircraft, its new 787 Dreamliner and other jets.
Under the deal, Boeing said it will build the 737 Max, the retooled version, at a union plant in Renton, Wash. Boeing previously had said that work could go to another state, sparking anger from labor leaders and intense lobbying by politicians in Washington and elsewhere.
In exchange, union leaders said that if their members approve the new deal, they will drop their opposition to Boeing's use of a new, nonunion plant in South Carolina to assemble some Dreamliners.
The Dreamliner is mostly assembled at a union plant in Everett, Wash. The NLRB accused Boeing of illegally shifting union work to a nonunion facility, allegedly in retaliation for previous strikes, a charge Boeing contests.
The deal involves compromises on both sides, with union leaders effectively offering to abandon what has been an emotional fight against Boeing's expansion in a state with little union presence, and Boeing foregoing the possible lower labor costs for the 737 Max that might have come from making it with nonunion workers. But both sides also stand to benefit significantly, not least by heading off the prospect of damaging strikes.
“We think this announcement is a significant positive surprise,“ Barclays Capital analysts wrote in a research note Wednesday, saying prospect of a strike was “one of the more significant risks not just for Boeing but for the entire (1/8)aerospace(3/8) supply chain in 2012.“
For the Obama administration, a labor settlement would remove a political sore, but without determining whether the intervention of the National Labor Relations Board was appropriate. The South Carolina fight came to signify for critics the Obama administration's approach to business policy, a phenomenon that has helped galvanize support for the GOP.
Joe Trauger, a vice president at the National Association of Manufacturers, said the group remains concerned the NLRB “believes it has the authority to determine where a business can locate and whom they can hire.“
The NLRB said in a statement that the proposed pact was “a very significant and hopeful development.“ If the deal is ratified, it said, “we will be in discussions with the parties about the next steps in the process.“
Boeing and union leaders, bitterly at odds for months, both heaped praise on the tentative deal -- as did as politicians from both parties in the state of Washington and South Carolina.
“There is no better news for our region's economy than a contract agreement between Boeing and the Machinists, and confirmation that Renton will remain home to the 737 line,“ said Washington Democratic Sen. Patty Murray. The decision was an “exciting proposition for all employees including the machinists' union,“ said Rep. Tim Scott, a South Carolina Republican.
Members of the union, which represents hourly staff at Boeing's Renton facility and other locations, are expected to vote over the next week. Some workers said they were surprised by the tentative agreement and may not back the pact.
Michael Healey, a 43-year-old jet mechanic dressed in a sweatshirt at the Renton plant, said he was “a little shocked.“ Mr. Healey said he wanted to learn more about the contract terms and was concerned that union members had only a week to make a decision.
Shawn Hoirup, a 26-year-old mechanic who said he was “blindsided“ by the news, called plans to build the 737 Max in Renton a good thing because otherwise he faces the possibility of being “put out of work.“
Union members have sometimes refused to back deals negotiated by their leaders. An IAM spokesman said, “We're pretty confident members will see the value in the offer.“ He pointed to the benefits it brings in job security for union workers as well as wage increases, cost-of-living adjustments, incentive pay -- and a $5,000 bonus to all workers if the deal is passed.
“Our members are definitely independent thinkers,“ he said. “But historically, they've gone along with leadership's recommendations more often than not.“
“This is an historic agreement,“ said Tom Wroblewski, president of the IAM local 751. He said that if members ratify the contract, the union would inform the NLRB that “we are satisfied and consider our grievances with the Boeing Co. resolved.“
The agreement comes as Boeing prepares to boost aircraft output by almost one-third over the next three years off the back of a bulging $332 billion order book. Boeing is planning to push up production of the existing 737 to 35 planes a month, and then to 42 a month or even higher. First delivery of the Max is expected in 2017.
The union said it was approached by Boeing in late October to lay the ground for replacing the contract, due to expire next September. Secret talks ensued that led to the tentative deal for a four-year extension through 2016.
Boeing said the deal provided certainty ahead of the planned production increase, and that it welcomed the union's agreement on efforts to boost productivity.
“Sometimes it takes a watershed event to change the relationship,“ said Beverly Wyse, vice president and general manager for the Boeing 737 program. She voiced hopes in an interview that the tentative agreement can lead to healthier relations between the jet maker and the union.
Even though it may be dropped, the NLRB's action over the Boeing Dreamliner plant in South Carolina could have lasting impact, changing how employers make decisions about where they put, or move, production plants, said Gary Chaison, professor of industrial relations at Clark University in Massachusetts.
“The lesson that was taught to employers is that you better be careful when you move production around, because if it appears that you're trying to avoid unionization or strikes, the NLRB will come down hard on you,“ Mr. Chaison said.
The White House declined to comment on the tentative agreement. Glenn Spencer, an executive director at the U.S. Chamber of Commerce, voiced hope that the deal “is the first step“ in the NLRB deciding to drop the case against Boeing.
“If the board prevailed on a judgment like this and was able to force an employer to basically shut down a factory and move that work somewhere else, that would set a dangerous precedent for employers all over the country.“