SEATTLE — The Machinists union leadership agreed Tuesday to take to its members a Boeing Co. proposal that would ensure the forthcoming 777X jet is assembled in Washington state and its giant wings are fabricated here.
The agreement means members of the International Association of Machinists will vote next week on a new contract with big cuts in future pension and health care benefits.
Union members will earn a $10,000 signing bonus if it passes, payable within a month.
The pension change is a major loss for current employees: Traditional pension accruals will stop, to be replaced by an alternative company-funded retirement savings plan.
Clearly those terms were tough for the Machinists leaders to accept.
“Only a project as significant as the 777X and the jobs it will bring to this region warrants consideration of the terms contained in Boeing’s proposal,” said District 751 leader Tom Wroblewski. “While not all will agree with the proposal’s merits, we believe this is a debate and a decision that ultimately belongs to the members themselves.”
If passed, the proposed deal will span eight years from the end of the current contract in 2016, ensuring Boeing management a full decade of labor peace.
“Securing the Boeing 777X for the Puget Sound means much more than job security for thousands of IAM members,” said Wroblewski. “It means decades of economic activity for the region.”
To try to secure a “yes” vote by the union’s members, Boeing’s package includes substantial cash awards: not only the big ratification bonus but also a generous buyout plan for workers over 58 who are contemplating retirement.
The outline of what’s under consideration suggests a major poker play by the company to cut its long-term costs, using the future of airplane manufacturing in the Puget Sound area as the high stakes on the table.
The 777X is a proposed new variant of today’s 777 that will retain the same metal fuselage but add new engines and new carbon-fiber-reinforced plastic composite wings.
The plane is expected to be launched at this month’s Dubai Air Show and to enter service around 2020.
The proposed deal includes a “golden handshake” buyout that would allow retirement with boosted pension terms of $95 per month per year of service for anyone over age 58.
The take-aways include significantly higher health care premiums and, crucially, the radically changed pension plan.
The new pension plan would have the company contribute a fixed percentage of gross salary into a retirement savings account each year: 10 percent the first year, 8 percent the second, 6 percent the third, and 4 percent every year thereafter.
The IAM is the last Boeing union with a traditional pension, and the company has sought unsuccessfully in multiple contract negotiations to move new hires away from a defined benefit pension plan to a defined contributions savings plan.
The offer would also change the wage structure so that new hires would take 16 years to reach the top of the pay scale instead of the 6 years it takes today.
One machinist summed up Boeing’s strategy this way: Offer the big signing bonus to entice younger members who perhaps aren’t thinking of staying their entire working lives with the company. And use the golden handshake early retirement package to swing the votes of those planning to retire in the next few years.
For everyone else, this machinist said, the offer is “a losing deal.”
But another machinist said the agreement is the best available. He said that major layoffs lie ahead because the 787 program was over-staffed as Boeing worked to fix issues now largely behind it.
He said the early retirement buyout will save those layoffs as the older workers take the offer.
“This is an incentive that will save younger people with families,” he said. “I think reality is, this thing will pass.”
Among the union rank-and-file there is a widespread conviction that Boeing has presented its offer on a “take-it-or-leave-it” basis.
One union official told members that if the offer is voted down, Boeing the next day will put the 777X work out to bid by other states.