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Putting negotiations in perspective


By Ray Goforth
SPEEA Executive Director

SPEEA and The Boeing Company have had a collective bargaining relationship since 1946. Generations of employees wearing union and management hats have negotiated the language in the existing collective bargaining agreements. The joint problem solving embodied in these agreements has in no small measure contributed to the remarkable success of the company.

This relationship hit its low mark in 1999 and early 2000 when corporate management decided that SPEEA didn't actually speak for the engineering and technical workforce. Management substituted its own judgment for that of the democratically elected union leadership and provoked, what was at the time, the largest white-collar strike against a private company in American history.

Despite genuine efforts to repair and enhance the relationship following SPEEA's 40-day strike, another fundamental rift emerged around the business model for the airplane that eventually became the 787. Management ignored the concerns of the engineering and technical workforce and adopted an outsourcing business model that came close to bankrupting Boeing. 

'Return to engineering excellence'
After a corporate leadership shake-up, the company came to acknowledge its mistakes and adopted a "return to engineering excellence" path. To make the shift, the company adopted a variety of changes which, for the most part, SPEEA supports. Even where we disagree, our perspective is usually given a respectful hearing by corporate leadership. This revitalized relationship helped to turn the company around from one poised on the edge of extinction to the one that is enjoying record profits today. Working together, the engineering and technical workforce brought Boeing to a level of success not seen for decades. This is the context we now find ourselves in as we begin negotiating a successor collective bargaining agreement for 22,200 employees in the Northwest Professional and Technical bargaining units.

Although both SPEEA and Boeing enter these negotiations from the same starting context, we have two different starting points in our analysis.
Boeing has a largely outward looking perspective. Boeing looks at a world still mired in the Great Recession, with manufacturing struggling, unemployment high, pay and benefits being slashed across industries. Boeing feels an almost gravitational pull to follow these trends regardless of whether the factors driving those trends are actually impacting Boeing. This perspective isn't entirely irrational. The large institutional investors that own large numbers of Boeing stock put pressure on the Board of Directors to follow the general economic trends. If you're a hedge fund manager and you see other companies slashing pay and benefits, the companies that don't slash pay and benefits are going to look like bad investments. The pressure to conform to Wall Street cost-cutting is enormous, even if doing so actually hurts company performance.

SPEEA has a largely inward looking perspective. SPEEA measures the health of Boeing and gauges what percentage of that health is generated by the efforts of the employees that we represent. By this measure, the SPEEA-represented workforce sees that it helped save Boeing from bankruptcy and turned it around to create record profits. The biggest problem facing Boeing Commercial Airplanes (BCA) right now is the ability to deliver planes to the customers fast enough. The present backlog stands at 4,000 aircraft, valued at $308 billion.

Although Boeing's defense organization is facing budget pressures due to the Great Recession, there's no reason to believe that the Pentagon budget won't rebound following historical trends once the general economy recovers. Even at that, BDS first-quarter profits were $742 million, up 11% from the same period last year. Rated as a top dividend-paying stock, Boeing shares generate about 7% annually for shareholders. The Boeing Board of Directors recently made it even more attractive by increasing the first quarter dividend to $.44 per share.

Position for the future

SPEEA looks forward and sees that as the 'baby boomers' retire, Boeing will face ever stiffer competition for the smaller pool of engineering and technical professionals. Now is the time to reinvest in the workforce and to position Boeing to be the employer of choice. We believe a market-leading company should pay market-leading wages. Despite the fact that our last contract delivered 5% wage pools throughout the height of the Great Recession, current salaries are just below or just above the 50th percentile (depending upon which skill set one measures). Market-average wages won't position Boeing for the future. 

While many companies are seeking to shift additional medical costs onto employees, SPEEA is proposing a program to find and remove errors and fraud. The program would enable a SPEEA-represented employee to identify an error on their medical bill (or a bill of one of their dependants) and if the error resulted in savings to the plan, the savings would be split with the member 50/50 up to a $1,000 maximum benefit. Based on figures compiled by the Health Care Anti-Fraud Association, a population the size of SPEEA's membership is overcharged $10 million a year. Implementation of our program could then save Boeing an estimated $5 million annually.

As we prepare to sit down with the company and update our collective bargaining agreements, Boeing is profitable with an eight-year order backlog, stockholders are realizing an increased return on their investment and our negotiation teams are ready with a plan to help contain rising medical costs. Much of this success was created because of SPEEA members' hard work and commitment to aerospace and to Boeing. We look forward to contract talks that respect our members' contributions to that success.