Boeing union opposes wage cuts for workers

(Bloomberg) — Boeing Co. has proposed a 30 percent pay raise directly to striking workers as the beleaguered plane maker tries to chart a path out of a crippling strike that has idled factories across the Pacific Northwest for more than a week.

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But union negotiators ruled out the possibility of a quick solution to the impasse and said they would not put the new offer to a vote.

The proposal is an improvement over the initial 25% wage increase that members of the International Association of Machinists and Aerospace Workers rejected earlier this month, but still less than the 40% originally demanded by the union. Boeing said the terms are final and only valid through Sept. 27, adding further pressure on workers to accept them.

Jon Holden, president of IAM District 751, said his negotiating team was completely blindsided by the move. The union has no intention of putting the offer to rank-and-file members for a vote because it is not possible to do so on such short notice, he said.

“Organizing a vote for 33,000 people is not easy,” Holden said in an interview. Union leaders also want to talk to members about the offer, he said, warning that it does not meet members' needs.

The maneuvers have added a tougher tone to the collective bargaining process. In a statement posted online, IAM District 751 said that by bypassing the collective bargaining process, Boeing “has taken it upon itself to disrespect our entire union.”

The exchange adds tension to negotiations that have stalled since Sept. 18, when two days of mediation by the federal government made little progress. After workers voted almost unanimously to strike earlier this month, the district said it would push for a significantly higher wage increase and for Boeing to reinstate a defined-benefit pension plan for its members.

“Trying to push through an offer so soon after such a strong strike vote seems like a pretty risky strategy,” said Nick Cunningham, analyst at Agency Partners LLP.

The dispute between Boeing and workers at its key manufacturing facility is being closely watched by Wall Street and the White House as labor disputes flare up in the U.S. ahead of the presidential election in November.

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Tight finances

At Textron Aviation, the manufacturer of Cessna Citation business jets, engineers also went on strike on Monday after rejecting an offer of a 26 percent wage cut over the weekend. And a possible strike by dock workers threatens to paralyze US shipping.

A prolonged strike would further worsen Boeing's already strained financial situation. The company has already burned through more than $8 billion in cash in the first half of the year as it scaled back production to fix quality defects exposed by a plane crash in January.

“We've heard your feedback,” Boeing said in a post on its website touting the latest contract offer. “We've made significant improvements to deliver more money in key areas.”

The aircraft manufacturer's shares were barely changed at 9:52 a.m. in New York. The value of Boeing shares has fallen by 40 percent this year, the second worst performance among the members of the Dow Jones Industrial Average.

The conflict has halted production of Boeing's cash cow 737 Max and other planes and could drain the company of another $1.3 billion in cash each month, said Sheila Kahyaoglu, an analyst at Jefferies. With Boeing at risk of losing its investment-grade credit rating, the planemaker has begun furloughing employees and taking other steps to conserve cash during the strike.

Senior managers, including new CEO Kelly Ortberg, have also accepted salary cuts for the duration of the layoffs.

The strike pits the financially struggling aircraft manufacturer against workers who have long been activists and have unfinished business with their employer. The machinists are bitter over a 2014 collective agreement that cost them their pensions and secured only modest pay increases at a time when inflation was soaring earlier this decade.

War of words

The company's latest offer includes the reinstatement of an annual bonus that averaged 3.7 percent of wages and was eliminated in the original contract. Striking machinists have raised this issue repeatedly in interviews. Boeing also doubled the bonus workers would receive if the latest deal is accepted, to $6,000, and increased its contribution to a pension plan that would be administered by the company, not the union.

Boeing has refused to meet since talks collapsed last week, Holden said. The company provided a brief update on the latest terms on Monday morning, but the two sides were still talking when Boeing made the offer public, he said.

Holden said he tried again Monday to bring Boeing back to the negotiating table. “They said, 'No. The offer is the offer,'” he said.

As the war of words escalated, Boeing struck back with its own version of events.

“We have been negotiating in good faith with the IAM since formal negotiations began in March,” Boeing said in an emailed statement late Monday. “After an unsuccessful mediation by the federal government last week, we submitted a best and final offer that includes significant improvements and takes into account feedback from the union and our employees. We presented the offer to the union first and then shared the details transparently with our employees.”

– With support from Siddharth Philip.

(Updates shares in 13th paragraph.)

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