When Boeing announced the production of their new plane the 777X, many just assumed that the company would locate production in its Washington states manufacturing facilities. Therefore, it came as a shock to many that the company was contemplating looking elsewhere, having had a presence in the area for 97 years. Most shocked was the local machinists union, the International Association of Machinists and Aerospace workers (IAM751), which represents 30,000 Boeing workers in the Puget Sound area.
Boeing was looking at 23 other locations to produce this plane, including Japan. However, in the end, Boeing chose to remain in Puget Sound, finalizing a contract with IAM751 on January 3, 2014.
It was still surprising to many observers to see the union, in the words of Holman W. Jenkins of The Wall Street Journal “knuckled under, voting narrowly… to accept Boeings terms” Even more surprising just weeks earlier, November 14th 2013 the union rejected the contract overwhelmingly by 67 percent. However, just a month and a half later the union accepted the contract. What happened in six weeks?
The union’s website gave the impression that this vote was very much influenced by local politicians, including Governor Jon Inslee and the Mayor of Seattle Ed Murray, both Democrats. The Wall Street Journal is even calling this change of heart by the union “the most important business story of 2014.”
This contract is indicative of a shift in the balance of power between unions and companies. The bottom line for the union’s first passing on the contract had to do with the pension plan, the bread and butter for unions, which the company wanted to change to 401ks. However, with the threat of losing an industry and jobs the union had to back down from those demands, accepting instead signing bonuses totaling $15,000 over 6 years.
We have to give some credit to the IAM751 union, which finally accepted economic reality. This is something out of character for them and unions in general, even though they weren’t given much choice in the matter. The hope of many politicians is that this area is known as the premiere “aerospace” cluster in the world, just as Detroit served as the auto industry cluster in America. But this comparison between Detroit and Seattle is one that panics many, and is in the forefront of the politician’s mind.
In Detroit the United Auto Workers (UAW) drove up labor costs and killed jobs. Hurting the companies like General Motors and Chrysler that fed the city, helped kill the city in return. Detroit serves to Seattle as an example to workers, politicians, and major companies like Boeing, of what not to do.
Boeing has shown that if you put a union between a rock and a hard place, it just might make the right choice.