Boeing, machinists union open contract negotiations

Boeing's three-year contract with the International Association of Machinists and Aerospace Workers, which covers about 27,000 production workers, primarily in the Puget Sound area, expires Sept. 3.

Doug Kight, head of human resources and labor relations for Boeing's commercial airplanes unit, outlined some of the company's thinking in an interview with The Associated Press on Tuesday. One of Boeing's key worries is that its growing obligation to its fund employee pension plan could undercut its ability to maintain booming orders and a massive backlog.

"In a long-term business like Boeing, where you have long-term capital investment requirements to invest in your new products and the design of your next generation of airplanes, a market downturn that all of a sudden obligates you to spend billions and billions to fund your pension is a real challenge," Kight said. "We've got to have more stability and predictability so that we can have some assurance that we've got the resources there to invest in the product line."

Kight said Boeing will ask the union to consider replacing a defined benefit plan with a 401(k)-style plan for new hires. Currently, Machinist-represented workers have a 401(k) and a pension plan that vests after five years. Kight estimated Boeing's pension liability is $46 billion.

He said the "enhanced" 401(k), into which Boeing would contribute a lump sum based on the worker's wages, would pay a monthly amount similar to the existing pension plan plus the regular 401(k).

Such moves have become more common in recent years. Last fall the United Auto Workers agreed to similar contract changes with Ford Motor Co. and General Motors Inc.

The proposal, which the union opposes, is also designed to make Boeing more attractive with a younger generation of workers who may not stay at the plane maker for five years and want a retirement plan that's portable and vests immediately, Kight said.

The Machinists union represents a wide swath of Boeing's hourly workers, from workers who make parts and assembly mechanics to airplane painters, quality assurance inspectors and even registered nurses. Including cost-of-living adjustments, they make an average of about $58,000 annually before overtime.

The expiring contract also covers employees in Wichita, Kan., the area of Portland, Ore., and Southern California.

Boeing also is proposing higher pay rates for entry-level workers for the first time in 16 years to bring it in line with what other employers offer. Kight said Boeing is not proposing a raise for the 70 percent of union workers who have reached the top of the IAM's pay scale, a level Kight said is in line with the market.

The bottom of the pay scale has languished while union workers received increases as recently as 2004 because few entry-level Machinists were hired during a period in which Boeing laid off and then recalled thousands of union workers.

The company is also considering incentive plans offering extra pay for improving productivity. Such plans already cover other groups of Boeing workers.

Citing a 7-percent annual increase in health care costs, Kight said Boeing is asking the Machinists to accept a modest increase in what workers pay for coverage and elimination of early retiree medical benefits for new hires who retire before age 65.

The union has threatened to strike over the company's pension demands. Tom Wroblewski, president of Machinists Union Local 751 in Seattle, said in an interview Friday that pay and health care details were unsatisfactory as well.

"They're posturing to take away benefits that we've fought hard for," he said.

Wroblewski said Boeing's blockbuster earnings, most recently a 38-percent jump in profit to $1.2 billion in the first three months of 2008, should support more benefits for workers, not the cuts and higher costs Boeing proposes.

The union opposes the pension plan switch, he said, because a 401(k)) lacks protections against a stock market decline or poor investment choices by workers.

The union struck for 30 days over company demands to cut retiree medical benefits and other "takeaways" before agreeing to the current contract in 2005, Wroblewski noted.

"I can't believe they would come back again and want to talk about that," he said.

In health care, Wroblewski said, "We're not interested in anything that's going to increase the cost to our members."

He also said Boeing Machinists have not had a general wage increase for four years, and the union wants higher pay for all levels of workers, not just entry-level hires, in addition to any productivity incentive plan.

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AP Business Writer David Carpenter in Chicago contributed to this report.

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