The Journal. - Why 33,000 Boeing Workers Walked Off the Job

Episode Date: September 16, 2024

Tens of thousands of Boeing’s unionized workers are on strike after they rejected a new contract last week. WSJ’s Sharon Terlep reports on the rising tensions that have led to this breaking point and what it could mean for the only American manufacturer of commercial and military aircraft. Further Reading:  - Boeing Freezes Hiring, Delays Pay Raises as Strike Worsens Finances  - Boeing Union Goes on Strike, Halting 737 Production  Further Listening:  - Boeing's Long Flight Delay – in Space  - Boeing Agrees to Felony Plea. Now Its Future Is Up in the Air.  - The Failures Inside Boeing's 737 Factory  Learn more about your ad choices. Visit megaphone.fm/adchoices

It's been a bad year for Boeing. It started in January, when a door panel blew out of one of its planes. Then in July, the company pleaded guilty to criminal charges related to two 737 MAX crashes in 2018 and 2019. There have also been ongoing supply chain problems and production delays costing Boeing billions of dollars. And now production has stopped altogether because on Thursday, 33,000 unionized workers at Boeing voted to go on strike. It's a big deal. This means that Boeing right now can't build all but one of its aircraft.

It means that they're losing a lot of money. If it ends in a day or two, it's more of a blip. But if this is something that continues, it has ripple effects throughout the whole industry. That's our colleague Sharon Turlip. She was in the room at a union hall in Seattle, Washington, as the leaders of the International Association of Machinists and Aerospace Workers announced the outcome of the strike vote. There were reporters in the room, there were TV cameras, and everybody kind of guessing which way the vote was going to go.

But then the union president, John Holden, came out on stage and he talked about the vote and how many people turned out. This is about respect. This is about addressing the past. This is about fighting for our future. Our members rejected the contract by 94.6%. They voted to strike by 96%. And the room filled with an absolute roar. There was screaming and yelling for some time and then everybody started chanting, you know, strike, strike, strike. We strike at midnight.

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strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, strike, It's Monday, September 16th. Coming up on the show, Boeing's workers are digging in for a fight. Who will come out on top? I'm going back to university for zero dollar delivery fee, up to five percent off orders and five percent Uber cash back on rides. Not whatever you think university is for. Get Uber One for students. With deals this good, everyone wants to be a student.

Join for just $4.99 a month. Savings may vary. Eligibility and member terms apply. To understand the beef between Boeing and its workers, you have to go back to 2008, which was the last time the union negotiated a contract. At the time, Boeing was about to put its 787 Dreamliner into production. It had this new plane, you know, and it was deciding where it was going to put work. And in 2008, the union launched a strike that cost Boeing billions and billions of dollars. And so they really had their back up against the wall at that point.

The strike helped the union come away with a contract that workers felt happy with. The labor group says the new contract protects more than 5000 factory jobs while preventing the outsourcing of certain positions and preserving healthcare benefits. But then, Boeing pulled a surprise move. A year after the negotiation, the company announced it was moving production of the 787 Dreamliner out of state to South Carolina. The airplane maker Boeing announced yesterday

that it will build a second production line for its new 787 jet at a facility in North Charleston, South Carolina, not at Boeing's main factory in suburban Seattle. The move saved Boeing a lot of money because in South Carolina, the workers weren't unionized. This meant the company didn't have to pay the higher union wages and all the benefits. It's a right to work state. It's not a unionized plant. And ultimately they would move all the production of the 787 Dreamliner there. Boeing has also said that expanding into another state diversified its manufacturing base and increased capacity. But for the union workers in Washington

state, this meant not only losing work, but also a lot of leverage when it came to negotiations. So during mid-contract negotiations a few years later, the union agreed to extend the terms of the existing agreement and made further concessions on top of that. And so between then and now, there were several waves of concessions that the Union agreed to in order to prevent another move of labor like happened with the 787. Some of those concessions were really big. Workers agreed to give up their pension plan.

And the wage increases the Union agreed to failed to keep up with the rising cost of living. Then there are the other issues that have dogged Boeing. First, the Max crashes, and then the incident with the door plug. Workers say, this has been demoralizing. You know, the argument from workers is like, is you've been cutting costs so we don't have adequate training, we're forced to work too much overtime. And so they very much see it as problems happen because Boeing's not investing in their workforce

and that they need to be able to attract and retain people. So the quality issue definitely came up. Boeing said that it's taking a number of steps to improve quality, including increased training and hiring new workers. When contract negotiations started again this year, union members were hoping to gain back some of what they'd lost. So what were their key demands this time? Going into union talks,

the union leadership said they were demanding a 40% pay increase over four years, much improved retirement benefits, and a commitment that Boeing would build its next new plane in the Seattle area with union labor. Bargaining took place throughout the summer. And last week, Boeing and union leaders reached a tentative deal. They just needed to get the rest of the union to sign off, too. What were the key features of that deal? They just needed to get the rest of the union to sign off too. What were the key features of that deal?

It was similar to deals that other suppliers and, for example, auto workers had reached with their union. It was a 25% pay increase over four years, increased contribution to a 401k plan, and a commitment to build a new plane in the Seattle area. But for rank and file union members, this contract wasn't good enough. In particular, workers wanted the full pay increase they'd asked for. This 25% was well below the 40%. And when they agreed to put more money into the retirement fund, they also did away with an annual bonus. And one of the benefits that workers gave up in these contract talks between now and 2008 was a pension.

And so the union president said that's a wound that may never go away or that may never heal. So the loss of the pension was so big for these workers, the additional money to a 401k plan just was not meaningful to them. On Thursday, union members had to vote on the tentative deal their leadership had reached with Boeing. Sharon was outside the hall where union members

were showing up to vote. She says the energy was high as workers were casting their ballots. It was a union hall in Renton, which is where Boeing builds the 737. There were traffic cones. There were so many people showing up to vote. There were people directing traffic. The hall's in kind of a neighborhood, so there were cars lining the street. And people came and they voted and they stuck around. So there was a lot of shouting out to one another, talking to each other.

Union members overwhelmingly voted to reject the contract and to go on strike. And I talked to dozens of people. I did not find a single person who was voting for the contract. Okay, so how'd you vote? I voted for the strike, rejected the contract, decided to be here and following the crowd. Tell me what you guys are striking for, what this is about for you. So how'd you vote? I voted for the strike projected the contract I decided to be here What you guys are striking for what this is about for you, they're not really helping much on the health insurance like they said they were It's about getting more we're trying to get a boost on today's numbers not numbers from 10 years ago 14 years ago

Not enough in this economy The thing that was striking talking to members is they had so many different reasons. They all mentioned the affordability and needing to live and needing to pay their bills. But for some workers, it was the pension. For some workers, they were angry over the pay that Boeing has given its executives. Some felt they were being unfairly asked to sacrifice because the company made mistakes. Some had very pragmatic reasons, but among older workers, there was a very deep sense of anger and pent-up frustration and of feeling like they had been taken advantage

of for a long time. Boeing said that it's working on a new contract offer to address the union's concerns and that the company's CEO was working on quote, resetting the relationship with union members. The CEO also acknowledged in a letter to union members that Boeing's mistakes contributed to its current situation. Boeing also pointed to a disconnect between the union and its members. The president of the union chapter said that union leadership is working to reach a deal that reflects its members' priorities.

Now, the workers are behind their picket line, and they're waiting to see what Boeing has to offer them. That's after the break. Boeing and the union are scheduled to restart negotiations tomorrow. But because of Boeing's current financial problems, the company doesn't have a lot of room to maneuver. Boeing burned through a billion dollars a month in cash at the beginning. In the first six months of the year, they have $45 billion in debt when the cash that they have is factored in. So financially, they don't have a lot of runway to not be building planes. And then in terms of just, you know, their customers, the airlines are quite frustrated that they haven't have a lot of runway to not be building planes. And then in terms of just, you know, their customers, the airlines are quite frustrated

that they haven't been able to build planes, you know, quickly enough and that there have been these quality issues. And you know, it's not good for suppliers when production starts and then stops and starts and stops because they have to lay off people and get those people back. So you know, they have all these problems that are exacerbated when they have to shut down their factories. It's estimated that the strike could be costing Boeing as much as $500 million per week. Given the state of its business, how long can Boeing afford for the strike to go on? So it really depends.

One of the questions is, are they going to raise money? Are they going to borrow money? You know, there's a question as to, you know, are they going to try to cut other costs? So it depends. I think if you look at what analysts are saying, they're saying that anything longer than a week or two could be very bad for Boeing,

and that probably if it's a strike that lasts within a week or two,'s they could deal with it. Earlier today, the company said the strike was jeopardizing its recovery and announced a slew of cost cutting measures. Boeing is going to freeze hiring and is considering temporary furloughs for its employees and executives. It's also going to cut back orders from suppliers for several of its jets. The company has also said it's eager to get back to the negotiating table.

So does that mean that Boeing will give workers what they want? The consensus is certainly the union seems to have more leverage than Boeing at this moment for that reason. Because like it sounds like they can't afford not to give workers what they want at this point. Like they're sort of stuck between a rock and a hard place. Yeah. Arguably they can't afford to not right now. So Boeing is in bad shape, but it's also one of only two major plane makers in the world.

Is Boeing too big to fail? Yeah. I mean, this is certainly different than, you know, what you would have seen in other industries where a company had even two or three really strong competitors. Boeing is the only American aircraft maker right now. Whenever Boeing has issues, one of the things you hear is you can't really, there's not going to be no Boeing. I mean, Boeing is going to be here. It's unlikely that we'd see a company like this disappear or know, disappear, go bankrupt.

All that said, they do have a competitor and this competitor is Airbus in Europe. And in the very long run, there are other countries, China included, that are trying to get into the market and make this so it's not, you know, just a duopoly. In the long term, there's some fear within the next, you know, they have a backlog, which is planes that, you know, airlines have bought, but they haven't yet made yet that lasts years and years, you know, so there's no danger of Boeing going out of business in the, you know, in the next year or the next two years, but certainly they're concerned about a long term erosion of their position in the world.

So Sharon, what's your takeaway? Could this become an existential threat for Boeing? You know, it depends on how long it lasts. You know, if this is something where they can't get the union back to the table and this stretches on and on, and they can't find something that is palpable to both the company and the union, it certainly could be. I think this is just Boeing's history coming back and, you know, it's really haunting it. I think, you know, these workers have so much pent up anger and frustration,

and it's really coming back at Boeing right now. That's all for today, Monday, September 16th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.