Boeing Union Rejects Offer, Company Looks Elsewhere to Build 777X

After three days of talks between Boeing Co. (NYSE: BA) and the International Association of Machinists & Aerospace Workers (IAM) local union ended Thursday night, the union's leadership rejected what Boeing called its “best and final” contract extension offer. As part of its offer to the union, Boeing would have committed to doing final assembly of the new 777X aircraft and the assembly of the plane’s composite wing at a plant in Washington and would have committed to doing final assembly work on the 737 MAX through 2024.

Just a month ago, the IAM membership rejected a Boeing contract extension that called for cuts in wage increases for union members, reduced health care benefits and lower company contributions to its defined benefit retirement plan. Some 67% of IAM members voted to reject that deal.

Boeing tried to sweeten yesterday’s offer to the union, adding $5,000 to its previous offer of a $10,000 signing bonus and improving dental benefits. The company made no change its previous pension offer, which would have allowed union members to keep what they have accrued to date under the defined benefit plan, but base future benefits on a defined contribution plan. The pension benefit issue was the primary reason Boeing’s November offer was rejected.

Boeing said it has received offers to build a new plant for assembling the 777X from 22 states, many of which have submitted multiple sites. A total of 54 sites are being evaluated for a new plant location.

After the IAM rejected Boeing’s offer in November, we suggested that the negotiations were not really over between the two sides. Building a new plant in Washington and taking advantage of the available talent pool in the state is still the company’s best option for assembling its new planes. The union could win its struggle with Boeing over the long-term pension benefits issue because the company’s current management eventually will figure out that it will not be around when the bill comes due and paying the benefits will be somebody else’s problem.