Shades of gray in union’s OK of Boeing 777X offer

SEATTLE — Many around metro Puget Sound breathed a big sigh of relief when they heard Machinists union members on Friday narrowly approved a Boeing Co. contract offer, which cuts benefits in exchange for securing thousands of high-paying jobs into the next decade.

The deal means 10 years of labor peace, an opportunity to establish cutting-edge manufacturing capability and stable aerospace employment in Washington. But it won’t stop the global economic trends that led union workers to vote yes.

Boeing workers have long been paid well above the industry standard, but they will face continuing downward pressure on wages and benefits, driven by factors such as passengers’ demand for cheap tickets and increasingly automated production.

And the vote divided local and international leaders and members of the International Association of Machinists and Aerospace Workers (IAM) in an era when organized labor everywhere is being forced to make concessions.

It’s not a win-win, nor is it a lose-lose.

“The controversial contract may bring mixed feelings to union members, but it brings unfettered joy to elected officials, the Puget Sound supply chain and other interested parties who feared Boeing would take all the 777X production elsewhere at the cost of nearly 30,000 direct and indirect jobs and huge hits to the local economy,” writes Issaquah aerospace analyst Scott Hamilton of Leeham Co.

Under the agreement, Boeing promises to build the 777X in Washington, including the biggest commercial airplane wing ever, made of carbon-fiber-composite material. And it will continue to build the 737 MAX and P-8 submarine hunter in Renton and the KC-46A tanker in Everett for the life of the contract, until 2024.

“The 777X and its composite wing will be built in the Puget Sound area by Boeing employees represented by the IAM,” Boeing said in a statement issued late Friday. “This work includes fuselage build, final assembly and major components fabrication, such as interiors and wires.”

Those jobs likely won’t be what they used to be.

Union disunion

Leading up to the vote, many Machinists said they were voting yes to protect jobs — or voting no to protect benefits hard-won over decades.

Concerns about jobs moving out of state carried the day, with 51 percent voting yes.

It was a tough decision for many like Jennifer Robbins, a 767 mechanic who’s worked at Boeing for five years.

Robbins didn’t hesitate to vote no on a similar proposal in November but was torn this time. Uncertain about a yes vote or a no vote, she chose not to vote at all.

“I’d vote no on principle,” the 29-year-old said.

But the contract’s most controversial concession — moving from a defined pension plan to a defined contribution plan — has upsides, Robbins said. For example, a 401(k)-like retirement plan can be left to heirs, unlike a pension plan.

“The pension is not the hill I want to die on,” she said.

Robbins wasn’t alone in not voting. Several thousand fewer Machinists voted Friday than in November, according to union officials, who didn’t release a vote count.

About 23,900 of the more than 32,000 eligible members of IAM voted, with about 600 more voting yes than no, according to Wilson Ferguson, president of Local A of District 751. The district represents the vast majority of Machinists at Boeing.

District 751 officials wanted to do a recount, but IAM international President Tom Buffenbarger did not allow it, Wilson said.

Outside the union hall in Everett on Friday, Bob Dennis wore a placard urging fellow workers to vote yes.

Rejecting the contract would have meant losing jobs to other parts of the country, said Dennis, a quality inspector on the 787 line in Everett.

Technology boost

Keeping the jobs means new technology coming to the area. Boeing’s promise to build the carbon-fiber wings of the 777X here is potentially crucial. Currently, the Chicago-based company makes only aluminum wings in Washington. In fact, no one in the U.S. makes carbon-fiber wings for commercial jets. Those of the 787 are made in Japan and shipped to Everett and North Charleston, S.C., for final assembly.

Machinist Dennis hopes that will give the state an edge in the future.

“If we keep the jobs here, we’ll stand a better chance for building the 757 replacement,” he said.

True, but “when Boeing proceeds with a new airplane design to replace the 757, followed by one to replace the 737, we’re going to see another round of efforts to browbeat the union and the state into more concessions or give-backs in exchange for production to be located here,” aerospace analyst Hamilton writes.

“The timeline for decisions for a 757 replacement should begin around 2017,” Hamilton says. “Decisions for a 737 replacement should begin around 2020.”

Composite manufacturing is critical to the future of building big jetliners, according to Hamilton and other aerospace analysts.

“Next-generation large commercial aircraft are moving toward lightweight materials to enhance fuel efficiency — a very important factor in the operating cost of the aircraft,” said Tom Captain, a Seattle-based analyst with Deloitte, an international business consultancy.

Having experience with composite manufacturing will give Puget Sound “a competitive advantage for successive generations of aircraft designs in the future,” he said.

Airlines are driving down more than just operating costs.

“It’s a new world,” Captain said. “Aircraft sales are under extraordinary pricing pressure as global airlines continue to compete fiercely to attract paying passengers. Therefore aircraft costs — labor and supplier costs — become the battlefield of competition for the aerospace industry.”

Additionally, states and countries compete fiercely for aerospace work, offering big economic incentives. Washington and other states did so after Boeing began a high-profile nationwide search for an alternate location to build the 777X and the wings, after the Machinists union rejected the contract offer in November.

Lastly, increasing automation and computer-aided design have greatly decreased how much labor is needed to build a plane, Captain said. A similar trend was seen “in automobile, computer and smartphone assembly, thus the diminishing influence of organized labor.”

Labor’s challenge

Organized labor has “to understand and internalize the tectonic changes and trends that are occurring in the industry, as the golden era of aerospace manufacturing is over — it’s a new reality,” Captain said.

Boeing’s bullish stance on curtailing worker benefits is part of that larger shift, which has been happening for decades, said Jacob Rosenfeld, a University of Washington sociology professor who’s studied organized labor.

“It’s a strong trend, and workers are pushing against technological and political forces,” Rosenfeld said.

Last year Michigan, a longtime organized-labor bastion, became a right-to-work state, meaning employees can’t be forced to join a union.

Machinists “are fighting a real defensive battle, and one that’s been lost in industry after industry,” Rosenfeld said.

“It’s not an inevitable process,” though, he said.

Take, for example, Issaquah-based Costco, which offers good benefits and has stayed profitable in a “cutthroat industry,” he said.

Building commercial jetliners is not much like working at Costco, and Boeing pays Machinists well above the industry standard, according to several aerospace experts.

In 2012, there were about 45,490 aerospace manufacturing jobs in Snohomish County, paying an average wage of $92,694, according to the state Employment Security Department.

That is a higher average wage and more jobs than any other major sector, meaning aerospace manufacturing is the biggest single driver of the county’s economy.

Those aerospace jobs include not just Machinists but engineers represented by the Society of Professional Engineering Employees in Aerospace (SPEEA), who typically draw higher pay, as well as administrative and management-level jobs that might not be represented by a union.

Whatever their status in the aerospace salary range, Friday’s vote seems to ensure most aerospace workers will continue to work in Snohomish County and Washington.

Herald writer Chris Winters contributed.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com.