Boeing Co.'s largest union balked at a company proposal to freeze pensions in exchange for rights to build the new 777X in Washington state, casting doubt over the future of manufacturing at the company's Seattle hub.
Machinists union members voted 67% against a contract extension that included pension and health-care benefit cuts, the union said in an e-mailed statement. Boeing was disappointed with the outcome and will open up production of its largest twin-engine jet to competitive bidding by other regions, Ray Conner, president and CEO of Boeing's commercial airplanes unit, said in a statement.
“Should this program end up outside of Everett (Wash.), we expect that the Boeing footprint in the Puget Sound region would shrink dramatically over the next 10 years,” Douglas Harned, a Sanford C. Bernstein & Co. analyst, wrote in a research note.
The results put the union at odds with state lawmakers, who sped through $8.7 billion in tax breaks to help land 777X production at Boeing's plant in Everett. Boeing's demands for concessions that would have saved billions of dollars and backed by threats to move production out of state sparked backlash among Machinists union members including “Vote No” rallies and accusations of blackmail.
While labor leaders were mindful that more than 20,000 jobs might hang in the balance with the 777X, they weren't willing to sacrifice retirement pay to ensure the region's continued role as the company's commercial manufacturing base.
“We preserved something sacred by rejecting the Boeing proposal,” said Tom Wroblewski, president of District 751, which represents about 32,000 Boeing workers, in a statement. “We've held on to our pensions and that's big. At a time when financial planners are talking about a 'retirement crisis' in America, we have preserved a tool that will help our members retire with more comfort and dignity.”
Despite the turmoil, there's “a very good chance that Boeing sees the virtues of compromise here and goes back to the negotiating table,” Richard Aboulafia, aerospace analyst with Teal Group, a consulting firm, said in a phone interview before results were announced. “I would hope the economics of the 777X program aren't so brittle as to depend upon this particular contract.”