A Friday vote by members of Boeing’s (NYSE:BA) largest union in Washington state will determine if the jet manufacturer will locate a major new assembly line for its redesigned 777X in the Puget Sound area. It’s a program that will inject millions of dollars into the local economy and keep thousands of high-paying aerospace jobs in the region.
By a margin of two to one, members of the District Lodge 751 of the International Association of Machinists voted down the first eight-year contract extension that Boeing laid on the table. Following that decision, Boeing Commercial Airplanes CEO Ray Conner issued a statement announcing that “without the terms of this contract extension, [the company was] left with no choice but to open the process competitively and pursue all options for the 777X.”
Twenty-two states, anxious to secure high-pay jobs and the prestige of being home to the operations of a prominent aerospace manufacturer, responded with bids within weeks. While the company knows that labor expenses would be lower in those states still under consideration, Washington was not completely ruled out. The manufacturer agreed to back away from its attempts to slow the pay scale rate of machinists while adding an additional $5,000 bonus and better dental coverage to its updated offer.
But if the slight revision Boeing made to the terms of the contract extension does not pass Friday’s union vote, the company will set up the final assembly of the 777X and the fabrication of its wings elsewhere, company spokesman Doug Alder Jr. told the Washington Post in an email. “This is the last opportunity for the union to vote prior to Boeing making a final decision on the 777X site,” he wrote.
The plane’s construction will have a huge ripple effect for the state where the production line is located, giving a boost to the local economy. Last year, Washington’s aerospace industry generated $76 billion in economic activity, with the 777 contributing $20 billion in economic activity and 56,000 jobs. Like many other states that have made offers to Boeing, Washington passed its own bundle of tax incentives, worth $8.7 billion over the next three decades.
“This is going to be an issue about the long-term welfare of this metropolitan area that depends on the Boeing Company and the businesses it contracts with to grow out this century,” Ron Sims, a former King County executive, told the Post. “This is the future of the region.”
Debate ahead of the second vote on the Boeing proposal shows a rift between local and national leaders of the machinists union. At the state level, union leaders see the contract dispute as a fight to preserve labor rights. “We are faced then with a choice to destroy everything that we have built over 78 years in order to save Boeing from making a decision that puts the future of the company, all its employees (union and non-union alike) and the stockholders at risk,” Wroblewski wrote in a letter to members, per the Washington Post.
Similarly, a message on the District 751 website read, “Because of the massive takeaways, the union is adamantly recommending members reject this offer.” Because Boeing is asking local union members to “give up” pensions, pay more in health care costs, and allow wage growth to “stagnate,” local leaders say the company is asking its workers to accept less at a time when “when Boeing has record profits, record backlogs and approved a $10 billion stock buy back.”
The 777X, which boasts the largest engines ever put on a plane and key cost-saving technologies that could change trends in modern aircraft design, is considered a pivotal to Boeing’s future profitability and a crucial component in the company’s fight against Airbus (EADSY.PK) for dominance in the long-range, twin engine market.
More from Wall St. Cheat Sheet:
- Boeing Contract Debate Divides Union Leadership
- Manufacturing Recovers as Demand for Durable Goods Soars
- Boeing Adds Another Dreamliner Glitch to Its Collection
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