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Boeing Contract Offer Could Prompt Engineers Strike

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Boeing is scrambling to figure out why batteries malfunctioned on its 787, prompting officials to ground the airplane this month. And at a time when Boeing most needs its skilled engineers, they're weighing a possible strike. Union leaders are considering the company's final contract offer.

The standoff between Boeing and about 23,000 engineers and technicians — mostly in the Seattle region — has been brewing for months. Dozens of them recently packed a union hall south of Seattle for training in how to run a picket line.

Members of the Society of Professional Engineering Employees in Aerospace are white-collar workers, some with Ph.D.s, who design Boeing's airplanes — not the type normally associated with picket lines. They embrace their geeky image with their slogan "No Nerds, No Birds." Their only major strike was in 2000. But contract negotiations this time have left many of them upset.

"It is hard for me to understand why the company insists we have to make concessions in our contract at this point," says union President Tom McCarthy. "The company is doing very well and we're a big factor in making that success."

Despite the Dreamliner crisis, Boeing has been doing well — it had record sales last year. The urgency of the 787 investigation brought the union and company closer to an agreement. But they're still at loggerheads. Boeing wants to offer new employees a so-called defined contribution plan — like a 401(k) — instead of a defined benefit plan like a traditional pension. Boeing is just following lots of other companies, such as GE, Lockheed Martin and the automakers.

"Most corporations are trying to de-risk," says Olivia Mitchell, who specializes in pensions at the Wharton school of business at the University of Pennsylvania.

"What that means is they're trying to get out of the mold where they're having their contribution amounts jackknifed by the economy, by interest rates, by the stock market and move to a more predictable funding flow," Mitchell says.

Boeing's pension obligation totals $75 billion, which is more than the company's entire stock market value. Boeing has been putting money into it, but it's still only three-quarters funded.

Company executives declined an interview, but Mike Delaney, vice president of engineering, spoke with reporters about the contract talks earlier this month, before the FAA grounded the 787. At the time, he said keeping costs down is key.

"We don't want just any deal — we want a deal that works for the company both short-term and long-term," Delaney said.

The union says new hires will be shortchanged. Company officials concede new workers will get less than current employees, but they say the offer is still generous. So that's a pickle: Do current employees strike on behalf of future employees? Union leaders say this is important because giving in would split employees into factions and start a downward slide in compensation.

"This is a headache they do not need at this point in time," says aviation analyst Scott Hamilton. He says Boeing can't afford an engineer walkout right now. Its top priority has to be fixing the 787.

"They're not even able to test fly the airplane at this point, so the longer the airplane's on the ground, the more costly it's going to be to Boeing," Hamilton says.

Union leaders will decide Thursday whether to have engineers and technicians vote to authorize a strike. If that happens, membership will have until mid-February to decide whether to approve a walkout.

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