Boeing’s 777X Contract: Union Rejects Counterproposal To Build Jet In Washington State

Dealing a fresh blow to Washington state’s aerospace industry, talks between The Boeing Company (NYSE:BA) and its main workers’ union, to build key parts of its new jet, the 777X, in the Seattle area, collapsed on Thursday after the union rejected a new proposal, which Boeing termed as its “best and final” offer.

The breakdown in talks came a month after the union, International Association of Machinists and Aerospace Workers, rejected a contract due to disagreements over retirement benefits. Boeing said its revised eight-year contract offered a $10,000 signing bonus and a lump sum bonus of $5,000 along with “dental benefits.” However, the new proposal retained the changes proposed to the retirement benefits plan in the original offer.

“We entered these discussions to address the concerns we were hearing from our employees,” Boeing President and CEO Ray Conner said, in a statement. “We've listened to the union leadership and had an open dialogue in hopes of moving toward each other. Unfortunately the offer, which would have ensured this great airplane for the Puget Sound region, was immediately rejected by the union leadership.”

Boeing said it presented a counterproposal on Thursday afternoon, in response to a proposal presented on Wednesday by the union, to secure 777X work, but the offer was rejected by the union leadership.

According to the union, Boeing’s counter-offer was mostly unchanged from the proposal that the union had rejected by a 2-to-1 margin on Nov. 13, demanding more concessions in retirement and health benefits with limited future pay increases.

Boeing’s latest offer proposed to transition workers from a defined pension benefit system to a 401(k) style contribution system, under which Boeing would provide 10 percent toward pension in the first two years, and lesser amounts for each remaining year up to the end of the contract.

“On Wednesday, the union had offered Boeing a preliminary contract proposal that would have guaranteed the company a total of 16 years of labor peace by extending the current contract, which has been in place since 2008, until 2024,” Tom Wroblewski, a representative of the union, said in a statement.

“However, the price Boeing demanded was too high. Our senior leadership team could not recommend Boeing’s counter-offer,” Wroblewski said. “Machinists Union pay and benefits make up less than 5 percent of the total cost of building an airplane. And for these pennies on the dollar, Boeing gets in return the most-skilled, most-productive aerospace workers in the world.”

Washington state’s aerospace industry generated $76 billion in economic activity in 2012, and $20 billion of this was generated by the 777's production, which also supports 56,000 jobs. And, the new contract would have provided employment for 20,000 people directly and indirectly, according to an earlier estimate of the workers’ union.