Union strikes Boeing

[Woodmonkey]

Walkout by 27,000 assembly line workers shuts aircraft maker that holds key place in job market and economy. Customers await new plane.

NEW YORK (CNNMoney.com) -- Workers at Boeing walked off the job on Saturday after nearly two days of around-the-clock talks failed to avert what could one of the nation's most disruptive strikes in more than a decade.

About 25,000 members of the International Association of Machinists in the Seattle area and another 2,250 in Oregon and Kansas started striking at 12:01 a.m. PT.

The company had offered union members raises over the next three years totaling 11% of current pay. Boeing also offered bonuses and pension improvements it said would give the typical worker about $34,000 in additional pay and benefits during that time.

"We are certainly disappointed," said Boeing spokesman Tim Healy. "We were certainly hopeful that members would look at that offer and the amount of money they would have in their pocket over the next three years, and that they would vote in their best interests."

But the union argues that contract changes demanded by the company would weaken job security and cause more work to be outsourced to contractors and suppliers, as well as drive up members' out-of-pocket health care costs.

"The details in the contract language is something we can't live with," said Connie Kelliher, a union spokeswoman. "We heard again and again from rank and file, 'The best pay and benefits are no good if you're not on the payroll tomorrow to collect them.' "

Workers voted 80% against the company's final offer on Wednesday and 87% in favor of a strike. They had been set to walk off the job early Thursday morning, but the union agreed to participate in two days of federally mediated talks at the request of Washington Gov. Chris Gregoire.

Talks took place at Walt Disney World in Florida, where the union was holding its regularly scheduled convention.

"If this company wants to talk, they have my number, they can reach me on the picket line," said a statement to members from Tom Wroblewski, the head of the bargaining team.

Boeing (BA, Fortune 500) said it would not try to assemble planes during the strike. Healy said the company stands ready to resume talks whenever the union is willing.

"Over the past two days, Boeing, the union and the federal mediator worked hard in pursuing good-faith explorations of options that could lead to an agreement," said Scott Carson, president and chief executive of Boeing Commercial Airplanes, on Friday. "Unfortunately, the differences were too great to close."
Dreamliner delivery at risk

The strike will push back delivery of the first of the fuel-efficient 787 Dreamliner jets, which are in strong demand by airlines struggling to deal with high fuel prices.

The Dreamliner, for which Boeing has taken about 900 orders from 58 airlines worldwide, is already two years behind its original delivery schedule. In April, Boeing was forced to push back its first delivery target until the third quarter of 2009.

The job action could cost Boeing an estimated $100 million a day in revenue and perhaps $7 million a day in net income, according to financial analysts. The company's revenue in the first half of the year was nearly $33 billion and net income was $2 billion.

Boeing has a history of rocky labor relations with its unionized workers, who struck three years ago for 28 days. The contract that ended that strike did not include many of the provisions the union had opposed, but it also did not include increases in base wages other than previously-negotiated cost-of-living adjustments.

That contract was reached at a time when airlines with about half of U.S. capacity were in bankruptcy protection and industry losses were continuing to mount.

Since then strong sales and production at Boeing have led to record profits at the aircraft maker.

The size of Boeing's unionized workforce has grown in the face of the strong demand, up by nearly half during the life of the contract. At a time when employers nationwide have trimmed more than 600,000 jobs from payrolls in the face of a weakening U.S. economy, Boeing is adding dozens of workers a day, according to the union.

Starting workers earn just under $9 an hour in base wages, according to Kelliher, the union spokeswoman. The typical Machinist at Boeing earns about $27 an hour, or $54,000 a year before benefits and overtime, according to the union. The most senior union members earn about $35 an hour, or just over $70,000 a year before benefits and overtime.

Exports of aircraft have become important to the U.S. economy, which as seen huge trade deficits that only recently started to retreat due to lower demand for imports by U.S. consumers and stronger demand for U.S. goods due partly to a weaker dollar.

In the first half of 2008, total U.S. civilian aircraft exports rose 14% to nearly $25 billion, and parts exports for those aircraft other than engines rose nearly 11% to more than $10 billion.

Last fall, the United Auto Workers union staged brief strikes at General Motors and Chrysler LLC over the companies' efforts to shift the responsibility for retiree health care costs to union-controlled trust funds rather than the companies' battered finances.

A strike by 87,000 workers at Verizon Communications in August 2000 failed to shut down the company. The last time that a strike larger than the walk-out at Boeing shut down a company's operations for an extended period was the 14-day strike at United Parcel Service by the Teamsters union in 1997.

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