Beaten by blackmail and betrayal at Boeing

January 6, 2014

Workers at Boeing facilities in Washington state narrowly ratified drastic concessions demanded by a highly profitable company. Darrin Hoop explains what happened.

IN A devastating blow to not just the machinists' union but the entire labor movement, workers at Boeing's main production facilities in the Puget Sound region approved--by a razor-thin margin of 51 percent to 49 percent--an eight-year contract extension with historic concessions in exchange for uncertain promises that thousands of jobs will remain in Washington state to build the new 777X airliner.

The current contract, which was set to expire in 2016, will now run through 2024, potentially ensuring a decade of labor peace for Boeing.

The vote was a stunning reversal of the overwhelming rejection of a very similar proposal in a November vote by members of International Association of Machinists (IAM) and Aerospace Workers District 751.

In the month and a half that followed, Boeing escalated its naked blackmail, threatening the jobs of IAM members if they didn't accept concessions. The giant aircraft maker had help in its extortion campaign--from the political elite of Washington state, dominated by the Democratic Party; a compliant mainstream media; and top leaders of the IAM, who were determined to shove the concessions contract down the machinists' throats.

Boeing workers in line to vote on their contract in November
Boeing workers in line to vote on their contract in November

Make no mistake about it--with this vote, Boeing management is hoping to destroy the union over time. Whether this happens or not will depend on the lessons learned by the more than 30,000 Boeing workers in District 751 and their sisters and brothers throughout the IAM.

As David Clay, a 36-year veteran at the Everett, Wash., plant said: "I felt cheated by the union leadership at the local level and the International; disrespected by Democratic Party leaders in local, state and federal office who we helped elect; and kicked in the teeth by the company after saving their bacon on the 787 Dreamliner and making the stock price reach historic highs."

FIRST ON management's wish list was the future elimination of Boeing workers' defined benefit pension, which will be frozen in 2016, with no future accumulation of benefits. Instead, workers will be shifted into a 401(k)-type retirement plan.

According to District 751's analysis of the proposal, "[T]he new retirement savings plan will provide two-thirds less than the current pension"--and that's assuming the new plan meets the 7 percent return that management predicts, which is far from certain. As the analysis concludes: "You will have to work longer, retire with less, and carefully plan how long you may live. With the new plan, when the money runs out, it's gone, and you might still be living."

Under the extension, monthly health care premiums will increase through 2024, costing workers $3,000 more each year by the end. Under two of the medical plans, coverage will decrease from 100 percent to 90 percent, with additional increases for co-pays. Boeing also reserves the right to unilaterally reduce health care benefit levels without negotiations, in order to avoid potential excise taxes under the Affordable Care Act--the so-called "Cadillac tax" enshrined in Barack Obama's health care law.

Entry-level pay will be frozen until 2024. By that time, starting pay for the bottom three pay grades will be at the state minimum wage, which rises each year with a cost-of-living adjustment. Overall general wage increases (GWI) will be 1 percent in 2016, 2018, 2020, and 2023. The current contract gives a GWI of 2 percent each year. If current pay increases continued through the eight-year extension, workers would get a 16 percent increase over eight years. Instead, they will get only a 4 percent hike.

Perhaps the most shocking concession of all--given the claims of politicians and IAM officials that this offer had to be accepted to preserve jobs building the 777X--is contract language that allows Boeing to outsource union work. It reads: "Boeing may contract or outsource certain 777X wing fabrication and assembly work packages in whole or part."

All these concessions were accepted in a proposal that barely changed from the one that 67 percent of District 751 members rejected in November. Among the small concessions made by the company, dental coverage per person will increase $500 in 2020 and another $500 in 2024. Management extended a letter of understanding on building the 737 Max and other airplanes through 2024, which in theory will protect more jobs in the future.

The biggest change is that management agreed to keep the current pay progression of six years, instead of its proposal for a system under which new hires might have needed a couple decades to reach top pay.

Finally, Boeing sweetened the previously offered $10,000 signing bonus with an additional $5,000--but it won't be paid out until 2020!

WHAT LESSONS can we learn from this showdown in which labor blinked first.

The first: corporate greed knows no bounds. Boeing workers earned $3.9 billion in profits for management in 2012. Ranked number 30 on the Fortune 500 list, Boeing has a record backlog of 4,777 orders for planes as of the end of September, which will take at least eight years to build.

According to, Boeing estimates that global jetliner sales will be worth nearly $5 trillion over the next 20 years, with the company set to claim at least half that money. Boeing is the world's largest commercial airline manufacturer and the second biggest military contractor behind Lockheed Martin.

In contrast to the machinists, who will get a total raise of 4 percent during the eight-year contract extension, Boeing CEO Jim McNerney's total compensation rose 20 percent to $27.5 million. IAM members who voted no on Boeing's proposals wanted to preserve their pensions, which average benefits of just over $2,000 a month upon retirement. Now, retirement payments will be less--while their poor CEO will suffer along on only $265,575 a month.

McNerney is a former top executive of 3M and General Electric, both notorious for their hard-line approach to unions, and serves on the board of directors for Proctor and Gamble and IBM. He is a trustee of Northwestern University, a past chair of the Business Rountable and Barack Obama's appointee to chair the President's Export Council.

To say that McNerney is well connected would be an understatement--which leads to the second lesson to be learned: The political subservience of both main political parties to Corporate America.

At the urging of Democratic Gov. Jay Inslee, Washington legislators passed the largest corporate tax subsidy ever granted by a state government. The corporate welfare provisions worth $8.7 billion extend previous business and operating tax breaks that were set to expire in 2024 through 2040.

And this is despite the fact that, as Greg LeRoy, executive director of Good Jobs First, pointed out:

Washington state has the most regressive tax system of any state in the country. It taxes low-income people at six times the rate as a share of their income as the top 1 percent. There's no state that has more things in their incentive code than Washington state. It's just riddled. It's a Swiss cheese tax code.

With "friends" of working people like the Democrats, who needs enemies? The IAM would do well in the future to follow the lead of the brave local unions that backed the Seattle City Council campaign of Socialist Alternative candidate Kshama Sawant. Political independence from both corporate parties is imperative if labor is ever going to get free of the stranglehold of the two-party corporate political system in the U.S.

THE SAD reality is the union didn't need to fall for Boeing's blackmail demand of jobs for concessions.

For one thing, while Boeing has been building production facilities in other states, including anti-union, right-to-work citadels like South Carolina, many industry analysts believe Boeing would be better off to keep production of the 777X in Puget Sound, with or without union concessions.

For example, Richard Aboulafia, vice president of analysis at the Teal Group, wrote, "From a strict industry/business/economics/common sense standpoint, the alternatives [to producing the 777X in Washington state] are seriously inferior." Aboulafia cited geography, experience of the workforce, infrastructure, state government support and the concerns of Boeing customers over delays in building the new 787 as reasons why Boeing shouldn't build the 777X outside Puget Sound.

Unfortunately, the leaders of the IAM didn't heed common sense of analysts like Aboulafia--which highlights the importance of the third lesson to be learned from this defeat: It's imperative to reform the IAM.

Despite the overwhelming rejection of Boeing's proposal in the November vote, IAM President R. Thomas Buffenbarger forced a second vote on January 3--the Friday before thousands of vacationing workers returned from the holiday plant shutdown. District 751 leaders didn't give an exact count of how many voted, but they did say the turnout was several thousand lower than for the first vote.

With a final margin in favor of the contract of around 600 votes, it's impossible to believe that the timing of the vote wasn't intended to suppress turnout and restrict union democracy.

The International's insistence on holding a vote comes in the wake of a federal Labor Department investigation that will force the IAM to rerun elections for International officers. Federal investigators concluded that Buffenbarger and the International failed to adequately notify members about the nominations process for the election last year.

The IAM hasn't held a general election for its international officers since 1961. According to the Washington Post, the IAM was the only union in 2012 that was being forced to re-run an election for top officers.

As Shannon Ryker, an 8-year Boeing employee, said in an interview:

As far as I'm concerned Buffenbarger needs to go. He has reigned over the IAM for way too long. We're not the first local he has misrepresented. When you stop being effective, it's time for you to go.

Unfortunately, until now that was next to impossible. The good-old-boys' club reigned in the IAM, and until the Department of Labor stepped in to supervise, no one else ever had a chance. He's been found guilty of election violations. As a result, the Department of Labor is conducting a new election. Nominations are in January, and my plan is to endorse Jay Cronk for International President and his running mate Karen Asuncion for International Vice President.

Cronk has been an IAM member for 38 years. He was recently fired from his position as IAM International Transportation Coordinator after he announced his candidacy for president. Asuncion, a 30-year IAM member, works at United Airlines at the Reagan National Airport in Washington D.C.

Cronk and Asuncion are running a reform campaign that calls for: reducing the size and salaries of the Executive Council (Buffenbarger's 2012 salary was $304,114, and nine other IAM International employees were paid more than $265,000), holding union elections every four years, ending practices of nepotism and cronyism in the union, and stopping spending on luxury items like $1 million a year to maintain the union's Lear jet, among other proposals.

The fourth lesson to stress is the importance of workers having control over their own means of disseminating information independent of the corporate-controlled mainstream press and all-too-often conservative unions.

Shannon Ryker set up her Rosie's Machinists 751 blog and Facebook page after the first vote rejecting the contract, when District 751 shut down any commentary on its web page. Beyond several letters of hers that appeared in mainstream newspapers, there was almost no outlet of communication for machinists to explain why they voted "no"--so the mainstream media's distortions got a hearing.

Ryker didn't consider herself a union activist before November, but in the middle of this contract struggle, as she put it, "I realized my apathy is part of the problem. If I don't change the way I'm operating, then nothing will change. So I started to become active. I started to write letters and I set up Rosie's Machinists." Within five days, her page had more than 1,000 people following it for information about the contract battle and the latest developments between management and the union.

THERE'S NO denying that the ratification of this concessions contract is a horrible blow to the IAM overall and specifically to workers at Boeing. It sets the union back decades, to a time when pensions and retirement programs didn't exist.

IAM members have filed complaints and charges with the National Labor Relations Board over the lack of democracy with the contract vote though it's unclear what will come of them.

Boeing machinists have a right to be bitter and angry after they were dumped on by the company, local politicians and their own union. The question now is what can be done to build on that anger and to prepare for future organizing that can start reversing this setback.

Hopefully, IAM members David Clay and Shannon Ryker can unite with other machinists who think like them in building a new rank-and-file network of activists at Boeing--one that can stand up to management, and can provide a lead independent of the union when its leaders refuse to fight.

As Clay put it when asked about what comes next for activists in the IAM:

We need to educate, agitate and organize. It's a tried-and-true formula. Brother Cronk knows the inner workings of the IAM. He seems open to listening to the rank and file, and the rank-and-file will be who elects him. But it has to be much more than just electing Cronk.

After pouring her heart and soul into the vote "no" campaign, Ryker offered this:

While I'm disappointed by the outcome of the vote, I'm proud of the work I accomplished. It was one of the most rewarding and inspiring experiences in my life. The incredible people I've met in the process make the journey worth it regardless of the outcome.

When crisis strikes, there are people who will rise to face the challenge. I've had the privilege of meeting and establishing relationships with many of them. They make this fight worthwhile.

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