already struggling with the grounding of its 787
Dreamliner, is facing a possible strike by union engineers, threatening even
more upheaval as it tries to fix the plane and resume deliveries to customers.
Voting ends tonight for
23,000 engineers and technical workers considering whether to authorize a
walkout in their dispute over retirement benefits. Approval would allow the
Seattle-based union to call a strike at any time. The Boeing Co. 787 Dreamliner
taxis at Reagan National Airport in Arlington, Virginia. Chicago-based Boeing
said work will move to less expensive sites outside its Seattle
jet-manufacturing and development hub if labor costs keep rising. Photographer:
Joshua Roberts/Bloomberg
Boeing Co. employees
assemble a 787 Dreamliner jet for Air India at the company's manufacturing
facility in Everett, Washington. The clash reflects long-standing differences
between the engineers who design Boeing planes and the managers at the helm of
the company. Photographer: Ron Wurzer/Boomberg
.Labor strife may
undermine the company’s efforts to recover. Union workers are involved in
trying to find the source of two battery failures that prompted the 787’s Jan.
16 grounding and potential solutions that could get the plane back in the air.
They’re also helping boost jet production to pare a seven-year order backlog
and develop upgrades for three models.
“The timing would just be
horrible,” Brad Lawrence, chief executive officer of Esterline Technologies
Corp., said in an interview. Bellevue, Washington-based Esterline gets about
8.9 percent of its revenue from Boeing, according to data compiled by
Bloomberg. “To have your engineers’ union be this disconnected that it would
walk out right when your company needs you most, it would just be horrible.”
The clash reflects
long-standing differences between engineers who design Boeing planes and
managers at the helm of the company. A “big divide” opened after Boeing
Chairman Frank Shrontz left as it acquired McDonnell Douglas in 1997 and
adopted a new emphasis on cost control and risk reduction, said Wolfgang
Demisch, a retired aerospace financial consultant who has followed the industry
for 40 years.
Cultural Shift
That merger led to
cultural changes that altered the tone of labor relations and played into the
Dreamliner development, he said. Alan Mulally, an engineer who headed Boeing’s
commercial airlines business, was passed over for the top job in 2005 in favor
of James McNerney, a former General Electric Co. star who was then CEO of 3M
Co. Mulally went on to lead the revival at Ford Motor Co. and was replaced by
Scott Carson, Boeing’s sales chief. Communication between management and
engineers suffered, according to accounts over the years from former employees
including Jim Albaugh, who succeeded Carson.
Negotiations on the latest
contract turned bitter in recent months. Chicago-based Boeing said work will
move to less expensive sites outside its Seattle jet-manufacturing and
development hub if labor costs keep rising. The company said it’s facing
increased competition and needs to pare its growing pension liability so it can
invest in new models.
Reward Sought
The Society of
Professional Engineering Employees in Aerospace union, or Speea, cites Boeing’s
$12.6 billion in profits since 2009. It says engineers deserve to be rewarded
as the company has returned cash to shareholders with buybacks and a 15 percent
dividend boost in that time period and increased McNerney’s compensation about
one-fifth through 2011 to $22.96 million, the most recent figure available.
“It’s too close to call,”
said Richard Aboulafia, a consultant with Teal Group in Fairfax, Virginia, who
has been in the industry more than 25 years. “I’ve never seen any labor dispute
in aerospace with this degree of uncertainty.”
Boeing was founded in 1916
by William Boeing, a Yale University engineering student, and built its success
on the innovation of its engineers.
The 787 battery issues and
labor strife show an erosion of that traditional strength, said Demisch, the
consultant. Company and government investigators still haven’t found the
reasons behind last month’s battery failures that caused a fire in one 787 at
an airport and forced an emergency landing by another.
‘Just Inadequate’
“The overall performance
is just inadequate, and that’s not world-class engineering, which is what
Boeing is known for,” Demisch said. “Boeing is heading toward a possible strike
of its engineers. That’s suggestive that Boeing’s employee relations also need
a re-engineering.”
Boeing’s share price has
never recovered from the first of what were eventually seven delays to the
Dreamliner’s commercial debut. The stock tumbled 26 percent from the day before
the first postponement in October 2007 through today, when it closed at $74.65.
That compares with a 2.2 percent decline in the Standard & Poor’s 500
Index.
Any reworking of the
Dreamliner would come alongside the development this year of the 787-9, a
stretched version due to fly in 2014, and the 737 Max, scheduled to enter
airline fleets in 2017. Boeing is also working on a 787-10 variant and the so-
called 777X, a revamp of its popular 777 wide-body jet that won’t be ready
until at least the end of this decade.
Engineering Needs
“Since the 787 appeared to
be out of the woods, and the 777 was put off until the next decade, Chicago
likely didn’t think it needed much from engineers,” Aboulafia said of
executives at Boeing’s headquarters. “Then that damn 787 battery thing
happened. Oops.”
The Dreamliner was
conceived in 2003, shortly after Airbus SAS began selling the A380, a
superjumbo jet that would steal the 747’s ranking as the world’s largest
airliner. Boeing responded by proposing a lightweight, composite plane that
would help airlines reduce fuel bills on long-haul routes by as much as 20
percent.
To save costs and reduce
risk, Boeing decided to rely on a web of global suppliers to design and build
most of the plane. That took some of the emphasis off the company’s own engineers.
The development coincided
with McNerney’s entry, Mulally’s departure and Carson’s promotion to replace
him. Engineers subsequently complained that management discouraged them from
voicing their concerns about technical and safety issues.
Too Quiet
“At times, people were
reluctant to share some of the views and thoughts they had,” Albaugh said in a
July 2010 interview.
Delays persisted over 3
1/2 years and some customers grew angry. Qatar Airways CEO Akbar al-Baker
famously told reporters at the Paris Air Show in 2009 that Boeing was being run
by bean counters and lawyers and threatened to cancel his order for 60
Dreamliners.
At that show, the 787 was
about two years behind schedule, and Carson promised it would fly within two
weeks. Instead, it encountered its fifth delay one week later, after a
structural flaw came to light that some engineers had known about for weeks.
The 787 finally entered service at the end of 2011.
Carson retired early from
Boeing a few months after the 2009 air show and was replaced by Albaugh, an
engineer who had been running Boeing’s defense division. He met regularly with
engineers and hired an outside consultant to encourage employees to share their
opinions and ask for help when they needed it.
Sales Chief
Albaugh lasted less than
three years before abruptly announcing his early retirement in June 2012.
McNerney replaced him with Ray Conner, who like Carson had been the company’s
sales chief.
Conner, who started his
career at Boeing as a machinist, was credited with getting machinists to agree
to a new contract a year ago. He’s been less successful with engineers, who
have been working without a contract since November.
The company’s initial
offer was rejected by a vote of 96 percent on Oct. 1. Boeing sweetened its
proposal on Jan. 17, offering salary-increase pools of 5 percent a year over a
four- year contract, matching the raises in the last wage deal.
Boeing didn’t budge from
its plan to switch new employees to a 401(k)-style retirement plan from the pension
workers get now. The union calls it a “big poison pill” in an otherwise good
contract offer and says it’s concerned that in a few years the pension will be
eliminated entirely.
‘Hard Bargaining’
“Hard bargaining is a part
of any negotiations and we expected that,” Doug Alder, a Boeing spokesman,
wrote in an e- mail. “But at the end of the day, we believe this offer proves
just how important engineers are to the company’s success.”
A simple majority of votes
would grant the union authorization to call a strike. Speea Executive Director
Ray Goforth said that wouldn’t necessarily result in a walkout; it would just
give the union time to keep negotiating.
Conner, 57, meanwhile is
appealing to engineers’ allegiance to Boeing as it tries to get the Dreamliner
flying again.
“As you know we are facing
challenges on the 787 program,” he wrote in a Feb. 7 memo to employees
represented by Speea, urging them to accept the company’s offer. “It was your
innovation, talent and skill that brought the 787 Dreamliner to life. … Now
more than ever, we need to deliver on those promises by coming together as one
team.”
McNerney said on a Jan. 30
conference call that Boeing will be able to figure out the 787 battery issues
without Speea- represented engineers.
That confrontational
strategy may alienate engineers further, said industry consultants including
Demisch.
No comments:
Post a Comment