First published Nov. 3, 2008
Boeing Machinists are back to work this morning – probably. The union was set to vote on Boeing’s revised contract offer Saturday, and most observers expected them to approve it. It wasn’t a slam dunk, however. My friends at The Herald in Everett were running an unscientific reader poll, which – as I write this – was showing a deep split,
with only a bare majority predicting the contract would be accepted.
But let’s assume that union leadership was able to sell the deal to its membership, and the Machinists are back. That is nothing but good news for the regional economy – particularly in Snohomish County, which got rocked in October by layoffs that will put 880 non-aerospace manufacturing workers out of work. The region needs Boeing paychecks, and the sooner the better.
So who won the strike? Outside western Washington, a lot of observers are calling this a clear victory for the union. The Wall Street Journal said that “the Machinists won key concessions” on the use of non-union workers and on benefits. One labor expert told MSNBC.com that the strike strengthened the union. “Broadly, this gives a shot in the arm to labor,” Philip Dine, the Washington, D.C.-based author of State of the Unions. The Washington Post talked to an East Coast labor relations professor who said the deal is one that would be envied by workers in other unionized industries.
“In the context of steel and auto workers, it’s a big achievement,” said Clark University professor Gary Chaison. “In the context of a clothing or grocery worker, it would be beyond their wildest hopes.”
But closer to home, The Seattle Times’ editorial board called the strike “senseless.”
“This was worth burning up how many billion dollars?” Times leadership asked incredulously in an editorial.
During negotiations, angry Machinists often seemed more interested in sticking it to the man than in negotiating a good deal, the Times said. And management “pushed the union toward a strike by making demands it knew were impossible … It was an issue of life and death, management said, except that it apparently wasn’t, because in the end it was about where the contractor should drop off the assembled aircraft parts.”
Some investors were brutally bashing Boeing last week. “Boeing undercut the value of its shares when it could have settled on a similar deal a month ago,” complained a blogger at one investor news site. “While Boeing management has been fiddling around, the company’s stock has dropped to $42, near a 52-week low … Giving into the union would not have cost it much in profits.”
Yet go-to analyst Richard Aboulafia thinks that it was the union that was short-sighted. This strike, he told clients last week, will be the last straw that pushes Boeing to move its manufacturing outside Puget Sound. “Over the next 10 years, (Boeing) will move to southern states with weaker unions and right-to-work laws that diminish union power. As the car companies realized, it’s easier to train flexible workers than it is to work with experienced but inflexible workers.”
I guarantee you we’ll hear more about that over the next few months – maybe as soon as this week, when Boeing Commercial Airplanes chief Scott Carson delivers a speech to a Seattle-area pro-business group (or maybe not – Boeing still has to settle a new contract with its engineers, after all). It will definitely be discussed down in Olympia starting in January.
Personally, I think that management came out of this pretty good, given that the union had all the leverage going in. That said, Boeing’s stock price fell about 25 percent ($15 a share) during the strike, which represents the destruction of close to $11 billion in market cap – capital Boeing will sorely miss in the next couple quarters, as it goes into the financial markets to raise cash to help its customers finance jet deals. Penny-wise or pound-foolish? You be the judge.
And with all this, I have the sense that this strike didn’t really resolve anything. The settlement represents a tactical compromise between labor and management, not joint agreement on a future strategy. You’re reading it here first – Boeing and the Machinists will be back in 2012 to fight over outsourcing and benefits again.
Elsewhere last week:
Microsoft – The Colossus of Redmond gave some peaks into its new Windows 7 software, which will replace the oft-maligned Vista in about 2010. Initial reviews were decidedly mixed, with many saying changes Microsoft is touting are merely cosmetic and don’t address the core problems many users have with Vista.
Starbucks – Barista-in-chief Howard Schultz was upbeat, saying that sales may have bottomed out in the recently concluded quarter. “We did see a slight improvement,” he told reporters at a meeting in New Orleans (which, by the way, is the port where Latin American coffee beans enter the United States).
Washington Federal – The Seattle-based bank became the first in the Northwest to accept money from the Treasury Department’s bank bailout fund – $200 million of it. CEO Roy Whitehead maintained his bank didn’t actually need the money, but saw it as a cheap way to add capital it can use to grow its business. “We’re going to have a chance to pick up assets, deposits, branches and human talent at prices we haven’t seen in a long, long time.”
