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Originally published October 28, 2008 at 12:00 AM | Page modified November 1, 2008 at 11:44 PM

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Boeing, Machinists reach settlement; pact calls for 15 percent pay raise over 4 years

The four-year deal, worked out on the fifth straight day of intensive talks, could end a costly strike that has stretched 53 days.

Seattle Times aerospace reporter

Boeing's new offer:
Oct. 27, after 52 days on strike

General wages:
Raises of 5, 3, 3 and 4 percent in successive years, for a total 15 percent over the four years of the contract.

Minimum wages:
Raised $2.28. In addition, recent hires get a supplemental raise to boost them past the entry level for new hires.

Pension:
A basic monthly pension of $81 per year of service for the first three years, then $83 in the fourth year.

Lump-sum bonus:
The greater of either $5,000 or 10 percent of gross pay including overtime, paid in the first year of the contract. $1,500 in each of years two and three.

Company incentive-pay plan: Machinists not included.

Medical-plan changes: No increases to employee costs.

Boeing's final offer:
Aug. 28, before the strike

General wages:
Raises of 5, 3 and 3 percent in successive years, for a total 11 percent over the life of the contract.

Minimum wages:
Raised $2.28. This would affect new and recent hires.

Pension:
A basic monthly pension of $80 per year of service, up from $70 in the current contract.

Ratification bonus: $2,500.

Lump-sum bonus:
The greater of either $2,500 or 6 percent of gross pay including overtime, paid in the first year of the contract. Boeing estimated this was worth about $5,400 on average.

Company incentive-pay plan:
Machinists in 2010 would join a plan that offers 10 days' extra pay for reaching profit and productivity targets and up to 20 days' pay for exceeding them.

Medical-plan changes:
In the traditional plan with zero monthly premium, out-of-pocket maximums would rise 50 percent for families. Monthly premiums for the HMO plan would drop 24 percent. Premiums in a third plan would increase 22 percent.

Source: Boeing, IAM

Boeing and the Machinists union could be back building airplanes as soon as this week after reaching a tentative agreement Monday night.

The four-year deal, worked out on the fifth straight day of intensive talks, could end a costly strike that has stretched 53 days.

To end the strike, union members must approve the deal by a simple majority. But since the agreement comes unanimously recommended by their leadership, approval seems likely.

The vote will happen in three to five days, the union said, and the 27,000 Machinists could be back to work immediately afterward.

On outsourcing, the issue on which earlier talks ran aground, the union agreed to let vendors deliver parts to receiving areas inside the factory but won a commitment that only Machinists will take it from there (except on the 787, where an outside vendor already delivers parts to the line). In addition, all Machinists currently working in facilities maintenance are protected from layoffs due to outsourcing.

Boeing said that despite these commitments it retained the flexibility it needs to improve processes.

In another concession, Boeing withdrew proposed medical-plan "take-aways" -- extra employee health-care costs to which the union had strongly objected.

On compensation, the first three years of the agreement remain largely unchanged from Boeing's pre-strike offer, with additional increases mostly in the fourth year that has been added to the usual term of the contract.

The monthly pension is to be raised from $80 per year of service in the previous offer to $81 for three years then $83 in the fourth year.

The wage increase remains at a total of 11 percent over the first three years, with an additional 4 percent in the fourth year.

Employees who are relatively recent hires will get a supplemental raise on top of the first year increase to ensure they earn more than brand-new hires.

In addition, the deal provides large lump-sum payments, which may help cover some of the money lost in the strike: the greater of $5,000 or 10 percent of annual salary in year one and $1,500 in each of years two and three.

The pre-strike offer included lump-sum payments of 6 percent the first year, plus $2,500 for ratifying.

"Our Union has delivered what few Americans have -- economic certainty and quality benefits over the next four years," the union said in a statement.

But were these gains enough to justify such a long strike?

"Yeah, it was worth it," said Machinists national aerospace coordinator Mark Blondin.

Over the weekend, said someone familiar with the timeline of the negotiations, the two sides resolved the issue that stalled progress in previous talks in Spokane on Oct. 13: the outsourcing of parts-delivery work to external vendors.

They then had to bargain further for a couple of days to reach agreement on compensation.

"We have gained important and substantial improvements over the Company's last, best and final offer that was rejected on September 3rd," said Machinists District President Tom Wroblewski in a statement. "Boeing is profitable because of our members' hard work and by standing together our members ensured they receive a bigger share of those profits."

The agreement "will provide job security for its members and limit the amount of work outside vendors can perform in the workplace," Wroblewski said.

In a statement, Boeing said it has "retained the flexibility necessary to manage its business, while making changes to the contract language to address the union's issues on job security, pay and benefits."

"This is an outstanding offer that rewards employees for their contributions to our success while preserving our ability to compete," said Scott Carson, chief executive of Boeing Commercial Airplanes, in a statement. "We look forward to having our entire team back."

Even with a quick approval, the strike will still be the longest stoppage at Boeing since a 69-day strike in 1995.

More than $2 billion lost

And it has been costly.

Joe Campbell, an analyst with Barclays Capital, said the details of Boeing's third-quarter earnings, released last week, give a window into the hit to company profits in the strike's first 24 days: about $685 million pretax, he estimated.

Extrapolating from that figure, he said a strike of about 55 days would cost Boeing some $1.5 billion in profits.

Adding in the extra expenses that Boeing will incur in recovering to pre-strike rates of production -- paying suppliers for overtime, expedited shipping and other extras, as well as the costs of additional delays on the 787 -- the true cost of the strike is likely to be well above $2 billion, Campbell estimated.

Based on previous strike experience, Boeing will not recoup that money for many years.

Some analysts have recently worried that the strike may damage the Machinists and this state in the long term.

Earlier Monday, before news of the contract agreement, respected aerospace analyst Richard Aboulafia predicted the Machinists strike ultimately would drive Boeing from the state.

"Aviation centers are almost impossible to create, but they can easily be destroyed. I think Seattle will be the next to go," Aboulafia wrote in his monthly newsletter. "This strike, following myriad others and with little hope of improved relations, will almost certainly precipitate a (Boeing Commercial Airplanes) exit."

Machinists had watched the D.C. talks closely. In interviews earlier this week, some said they were pressed to the wall financially, while others shrugged off the lack of a paycheck and relied on savings they'd amassed to cover the strike.

Scott Blymyer, 48, a 20-year veteran facilities maintenance electrician in Everett, said he saved for a strike well in advance.

"We're strong until the middle of next month," said Blymyer in a telephone interview, as he hunted for his cigar cutter. "I'm managing to have a few cigars."

Blymyer said it's important to him that the union win concessions that go beyond Boeing's final offer before the strike.

"I don't want to stay out this long for no gain," said Blymyer. "There better be an improvement."

Wally Blacklock, 49, a 21-year Boeing veteran, works as a lead technician on the Navy's Poseidon anti-submarine airplane for the military side of Boeing.

Most of his colleagues had saved in anticipation of a strike, a strategy made easier by the copious amounts of overtime work required by Boeing for the past several years, he said.

He recently returned from a weeklong trip to New Mexico, where he hunted elk with his extended family.

"It's not affecting us at all," said Blacklock. "Pretty much everybody I know is financially healthy."

But Chris Johnson, 32, a union steward, has been at Boeing just over a year and lacked the full savings cushion. He works in Renton delivering parts such as seats, galleys and winglets to the 737 production line.

Johnson said he and his longtime partner had planned to marry this year after an eight-year engagement, but pushed out the wedding because of the strike's financial pressure.

Johnson said he's had to pay $200 a month out of pocket for prescription medication for his 7-year-old son and has fallen a month behind in the rent for his apartment.

Another Machinist, who works in Renton and asked not to be identified, felt compelled by financial hardship to cross the picket line.

His wife said she felt "one step away from destitution."

Unable to afford rent next month, the couple contemplated splitting the family up: He'd move with his son to live with his brother while his wife moved to a much less expensive apartment with her daughters.

Instead, he went back to work less than two weeks before Monday's deal.

"It was a tough decision. But my family has to come first," said the Machinist. "I can't stand by and allow my family to go to pieces."

The tentative Machinist deal comes just a day before Boeing was due to begin formal full-time bargaining with the union for its white-collar work force, the Society of Professional Engineering Employees in Aerospace (SPEEA).

At the request of Boeing, SPEEA agreed to postpone those talks by one day, to allow time for the company's top labor negotiator, Doug Kight, to return from Washington, D.C.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2008 The Seattle Times Company

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