Boeing Engineers to Vote on Contract for 4 Years of Labor Peace

By Susanna Ray

Nov. 15 (Bloomberg) -- Boeing Co. and union leaders agreed on a contract offer that if approved would give engineers an average 5 percent raise and Boeing the labor peace it needs to get production of the new 787 and 747 jumbo jet back on track.

Boeing and the Society of Professional Engineering Employees in Aerospace agreed yesterday on a four-year proposal that 20,500 union members will vote on by mail-in ballot from Nov. 21 to Dec. 1, the day the current contract expires.

``We've addressed tough issues in this contract,'' Boeing's lead negotiator, Doug Kight, said on a conference call yesterday. ``They're offers that show our respect for our engineering and technical employees.''

Kight and engineering leaders have been in talks in a hotel near Boeing's Seattle manufacturing hub since Oct. 29, three days before an eight-week strike by Boeing's 27,000 machinists ended. That walkout, over job security and compensation, idled factories and cost Boeing more than $10 million a day in profit. Engineers had threatened to stop work over similar issues.

The machinist strike also contributed to a delay of as much as nine months in the new 747-8's entry into service and pushed the first delivery of the 777 freighter into next quarter rather than this quarter, Boeing said yesterday. The company is still assessing the strike's impact on the 787, which was at least 15 months behind schedule before the walkout.

Union members will pay about $200 a year more for improved health-care coverage that will cost Boeing about $3,000 extra under the agreement, Kight said. Boeing agreed to give the labor group more input into outsourcing decisions and to keep giving new employees a defined-benefit pension rather than the 401(k)- style plan the company had wanted.

Raise Pool

Boeing said it will set aside a pool amounting to 5 percent of its salary payments to cover the increases. Some workers will get more, while all engineers will be guaranteed at least 2 percent a year and technical workers at least 2.5 percent. The more than 13,000 Boeing engineers in Washington state, Oregon, Utah and California make an average of $88,000 a year now, and the nearly 7,000 technical workers average $67,000.

The company also agreed to increase pension payments and overtime rates and to keep Utah engineers on the same contract.

The engineers, like the machinists, had sought limits on the use of non-union, temporary workers that Boeing has employed to help control costs while developing and building planes like the 787 Dreamliner. The union wanted Boeing to agree to a set percentage of subcontractors.

Providing Input

Boeing instead allowed ``unprecedented language'' to be written into the contract giving the union ``regular opportunities to provide input on our use of non-Boeing labor,'' Kight said. The company retained its freedom to make business decisions itself, he said.

Boeing and the union agreed to set the duration of the contract for four years instead of three, as it did with the machinists union. The extra year would give Boeing a longer timeframe with labor peace with both groups.

While the engineers have walked out twice since their union was founded in 1946 -- for one day in 1993 and for 40 days in 2000 -- the machinists have stopped work seven times in strikes lasting as long as 10 weeks.

The engineers initially sought raises of 10 percent annually through 2011, more vacation days and a restoration of early retiree medical benefits.

``It was some very tough negotiations and it really did come down to the wire,'' said Bill Dugovich, a union spokesman. ``Boeing gave way on money,'' which led to an agreement, he said.

The union calls Boeing an ``island of success'' in the slumping economy, because of its record profits and unprecedented $276 billion order backlog, and says employees deserve a greater share of the work and the earnings. Boeing has said any contract improvements must be affordable even if there's a future slowdown and that it needs outsourcing flexibility to stay competitive.

Machinists Strike

The 27,000 machinists, who stopped work on Sept. 6, voted on Nov. 1 to accept a proposal that included a 15 percent raise over four years, higher pension payments and starting wages, job security for maintenance and parts-delivery workers and the ability to bid for more work that Boeing's considering outsourcing.

A strike by engineers, who design the planes and oversee their manufacture, would extend jet-delivery delays, hurting airlines worldwide that are counting on newer models to ease fuel consumption.

Boeing and its larger rival, Toulouse, France-based Airbus SAS, have about seven years' worth of orders to fill.

Boeing fell $2.12, or 4.9 percent, to $41.04 yesterday in New York. The stock has declined 53 percent this year.

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