Boeing's Offer Is Inadequate, Holds `Strike Issues,' Union Says

By Susanna Ray

Aug. 23 (Bloomberg) -- Boeing Co.'s offer to raise pay and benefits as much as $24,000 over three years for machinists in its largest union is inadequate and the proposal still contains ``strike issues,'' the labor group said.

Boeing, aiming to avoid a possible strike when machinists vote on the outcome of negotiations Sept. 3, offered yesterday to raise wages 2.5 percent the first year and 2 percent the following two years. The union had said it was seeking a gain of 9 percent to 13 percent, spread out over the contract, for the machinists, who make an average of about $56,000 a year.

The offer is ``well below expectations and very inadequate in all areas,'' said Connie Kelliher, a spokeswoman in Seattle for the International Association of Machinists and Aerospace Workers. ``The wage package is below industry standards, and it's doubling or tripling health-care costs in some cases.''

The union says workers haven't had raises, except for cost- of-living increases, since 2004 and deserve to share in Boeing's $10.7 billion in profit since then. Boeing has said it needs to make sure the contract is sustainable. The Chicago-based planemaker faces the possibility of deferred or canceled orders as airlines cope with record oil prices.

Boeing executives and union negotiators checked into a Seattle-area hotel Aug. 21 to start a final push before the contract runs out for 27,000 machinists, who build parts and assemble the planes. A deal would cover employees in the Puget Sound area -- the site of Boeing's main factories -- as well as Wichita, Kansas, and Portland, Oregon.

Yesterday's offer rewards workers ``for contributing to the company's success while addressing head on the challenges we face in managing long-term costs,'' Doug Kight, Boeing's vice president for human resources, said in a statement.

Boeing Offer

Under Boeing's proposal, workers would get a $2,500 lump-sum bonus in the first year as well as an incentive-pay program in the second and third years. Pension contributions would be raised by 7.1 percent and employees would pay more each month for health-care insurance, though coverage would be improved.

The company proposed increasing starting wages by $1.28 an hour and giving new hires a 401(k) retirement plan rather than the machinists' current defined-benefit pension program. The typical Seattle-area machinist starts with a pay range of $12.72 to $28.22 an hour.

The machinists, who make up about 17 percent of Boeing's 159,300 workers, will vote Sept. 3 whether to accept the contract or go on strike the next day. A walkout would shut down the company's aircraft production lines and could further delay the 787 Dreamliner. That plane is due to fly for the first time in November and be delivered to customers starting in next year's third quarter, at least 14 months later than first planned.

787 Delays

Boeing's stock is trading near a four-year low and has dropped 35 percent since the first of three 787 delays was announced in October. The shares rose $2, or 3.2 percent, to $65.55 yesterday in New York Stock Exchange composite trading.

Boeing backed off a proposal to put the 700 Wichita workers into a separate bargaining group, a plan the union had opposed. The company is still pushing other ideas the union has said it would encourage a strike over, including the 401(k) plan and the elimination of some retirement medical benefits for new workers. Committees for the two sides have been meeting weekly since May to discuss non-economic matters.

``All the strike issues remain on the table except for Wichita,'' the union's Kelliher said.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net