Boeing Union Rejects Contract, Company Could Move 777X Plant

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The labor union representing more than 30,000 workers at Boeing Co. (NYSE: BA) has rejected an eight-year contract extension that the company said was required if the new Boeing 777X was to be manufactured in the state of Washington. Last weekend the state legislature approved a package of incentives worth about $8.7 billion and promised another $10 billion in infrastructure improvements.

The International Association of Machinists and Aerospace Workers (IAM) leadership had negotiated a new contract with Boeing that would have taken effect in 2016. The deal called for cuts in wage increases for union members, reduced health care benefits and lower company contributions to its defined benefit retirement plan. Some 67% of IAM members voted to reject the deal, and the union local president said that members had “preserved something sacred by rejecting the Boeing proposal. 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.”

A Boeing representative said, “Without the terms of this contract extension, we’re left with no choice but to open the process competitively and pursue all options for the 777X.” The company has already built a plant in South Carolina, over union objections, to manufacture the 787 Dreamliner, and there have even been suggestions that the company would build parts of the new plane in Japan.

All the tough talk on both sides does not mean that Boeing will take its ball and go someplace else, at least not immediately. The company will have to solicit bids and weigh the benefits of leaving behind the thousands of skilled employees it employs in Washington against the costs of acceding to the union’s demands. The fat lady has not yet sung in this particular drama.

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