Former Boeing unit takes markedly different approach to labor
Boeing's tense relationship with the Machinists union contrasts sharply with the collaborative approach taken by key supplier Spirit AeroSystems, whose CEO says their year-old contract calls for "sharing the ups and downs."
Seattle Times aerospace reporter
Boeing's bitter dealings with the Machinists union have been on trial this summer at a federal labor hearing in Seattle.
Meanwhile at Spirit AeroSystems, a top aerospace supplier in Wichita, Kan., that once was a Boeing division, Machinists officials and company management are virtually singing "kumbaya."
Last year, they signed a landmark contract committing to "a long-term, cooperative relationship" with an unprecedented length of 10 years.
The contract ties a portion of workers' pay to Spirit's economic performance through the booms and busts of the volatile aviation business. And while the union lays aside the possibility of strikes for a decade, management commits to "the maintenance of a strong, highly skilled, and sustainable work force in Wichita."
"This is what we tried to do with Boeing," said Tom Buffenbarger, national leader of the International Association of Machinists (IAM). With Spirit, "we found a partner."
"Spirit is a great lesson for businesses that can get over a myopic, right-wing view of how labor can work with them," Buffenbarger added.
Next year, Boeing and the IAM will once again face off in contract negotiations. After four strikes in the past 22 years, another would be devastating to both Boeing's business and this region's chances of future airplane work.
Does the Spirit agreement suggest a way forward?
"My hand of trust"
Spirit, a public company, now makes large airplane sections for Boeing, Airbus and smaller manufacturers. Airbus Executive Vice President Tom Williams called it "the best supplier in the Boeing portfolio."
Business is booming. Of its 14,800 employees worldwide, about 13,000 work at the former Boeing sites in Kansas and Oklahoma, up from about 8,400 when Boeing sold them off in 2005 as part of a Wall Street-driven strategy to reduce in-house assets.
Just over a year into the Spirit contract with the IAM's 3,800 members in Wichita, Buffenbarger declares himself "very pleased with the way it's been working."
Spirit Chief Executive Jeff Turner is just as positive. In an interview at the Paris Air Show in June, Turner frequently cited the twin pillars of his approach to every business decision: "Keeping the company healthy; and keeping the team for the future intact."
The Spirit contract doesn't offer every IAM member an ironclad job guarantee. "You can't guarantee the future," Turner said.
Still, the company agreed "to maintain major manufacturing operations in Wichita for the life of this agreement and therefore maintain jobs in Wichita."
The contract also commits to considering layoffs only as a last resort, and mandates that the union must be consulted about any decision to outsource or offload work.
These are the issues that have been the constant focus of Boeing's conflicts with the IAM.
Boeing management has repeatedly refused to commit to building future airplanes here. In July, CEO Jim McNerney even balked at promising that an upcoming model of the 737 with a new engine will be assembled in Renton, where that plane is built today.
Just eight months before inking its 10-year agreement with Spirit, the IAM failed to reach a deal with Boeing that would have guaranteed a similarly long stretch free of the threat of strikes.
When those talks collapsed in fall 2009, Boeing snubbed its Everett workforce and chose South Carolina for a second 787 assembly line.
The Machinists complained that the company illegally retaliated against Puget Sound region workers for past strikes. That led directly to the National Labor Relations Board (NLRB) charge that Boeing is now fighting.
In Wichita, things could hardly be more different.
For both sides at Spirit, it's "a groundbreaking new approach," said Spirit board member Dick Gephardt, former Missouri congressman and House majority leader.
At an extraordinary employee meeting in March 2010 before formal negotiations opened between Spirit and the union, Turner, Buffenbarger and Gephardt jointly addressed more than 500 managers and union shop stewards at the Wichita plant, selling hard the idea of a new relationship.
"I want 'The Fighting Machinists' at my side, not in my face," Turner told his employees, borrowing the union's own slogan.
Turner — who grew up in Wichita and has worked a combined 36 years at Boeing and Spirit — vowed to keep the plant and its workforce at the heart of the company.
"Wichita, Kansas, is the mothership of Spirit AeroSystems," Turner said. "If we don't keep that healthy and intact, the rest will crumble."
"I offer you my hand of trust," Turner added. "I ask you to trust me."
Buffenbarger responded that he trusted Turner's vision for the company.
"We do have a future," he assured his members. Then he added, referring to Boeing's sale of the Wichita plant in 2005: "We're going to show Boeing. And we're going to show the world."
Lower pay raises
Yet union members didn't exactly embrace the resulting agreement.
Offsetting Spirit's promises of greater job security, the deal offered just four increases of 1 percent each in base pay over the 10-year contract.
Workers, whose base pay had been slashed by an average 10 percent as part of the deal when Boeing sold the plant, saw a reduced wage rate locking in for the longer term.
Despite the hard sell and Buffenbarger's endorsement, 57 percent of those voting rejected the agreement; and 58 percent voted to strike.
But a strike requires a two-thirds majority. So the contract took effect by default.
A shop-floor machinist, who asked that his name not be used, said older Spirit workers were so disgruntled that there was talk after the deal of organizing a vote to oust the union.
He said that possibility has receded in the year since, as workers assess their position in the economic downturn. "I'm glad I have a job," the machinist said.
Buffenbarger insists his members have begun to warm to the deal.
And he said other companies he negotiates with — although not Boeing — are looking closely at the Spirit/IAM agreement as a possible model for their own contracts.
One of those is GKN, which in 2001 bought from Boeing a St. Louis plant that now employs about 900 Machinists union members. A GKN spokeswoman confirmed the company is studying the Spirit/Machinists model.
The most radical aspect of the 2010 agreement is this: A large portion of the total compensation comes as bonuses that depend on how the company performs. Boeing's contract with the Machinists has no incentive bonuses.
"We're committed to sharing the ups and downs," said Turner. "If the company is healthy and does well, we all win. If things become difficult, we're all in the difficulty together."
Buffenbarger said a joint committee of management and union that discusses everything from worker incentive-bonus targets to how to stave off any threat of layoffs is working well.
"We share everything between each other openly and honestly, so there's no doubt if it's good times or bad times," said Buffenbarger. "Trust is fundamental. You can't betray one another."
This collaborative approach is supported by Onex, the Canadian private equity firm that bought Spirit from Boeing.
"Aligning economic incentives between workers, management and shareholders is the right way to run a business," said Tawfiq Popatia, a principal with Onex and a member of Spirit's board. "The IAM is totally core to the success of Spirit."
Still, labor relations at Spirit aren't perfect.
This summer, negotiations between Spirit and the white-collar union, the Society of Professional Engineering Employees in Aerospace (SPEEA), proved unexpectedly testy.
In a vote at the end of July, SPEEA members overwhelmingly rejected management's initial contract offer, after which the union's executive director, Ray Goforth, raised the possibility of a SPEEA strike this fall. Union officials are to hear a new management proposal Thursday.
Still to be tested
Gary Chaison, professor of industrial relations at Clark University in Massachusetts, said it's too early to laud Spirit's IAM deal as the new way forward in labor agreements.
"I don't think companies want to emulate Boeing. They don't want to be as confrontational," Chaison said. "But they have to be sure they'll not come out losing."
He said the next downturn will test Spirit's agreement.
"It remains to be seen how groundbreaking it can be when the hard times come," he said.
Airplane manufacturing has boomed in the past year so the Spirit-IAM agreement hasn't been tested by a serious downturn.
The most serious adversity Spirit has faced was two years before the deal.
In the preceding two decades, the IAM had struck Boeing three times with the Machinists in Wichita and in the Puget Sound region acting in unison.
In 2008, with Spirit now a separate entity, a two-month IAM strike shut down Boeing again. Though this time Spirit workers were not on strike, the stoppage blocked the flow of Spirit's airplane sections to the Puget Sound region's final-assembly plants.
Turner said Wall Street urged him to save money by temporarily closing much of the Wichita plant and laying off employees. Instead, choosing a more costly approach that kept his workforce intact, he moved Spirit to a three-day week.
That helped cement his longtime relationship with Buffenbarger, which has grown closer since Boeing left.
Chaison said unorthodox labor deals like Spirit's usually arise from such personal détente. "It most often is personality that drives these things," Chaison said.
Between Boeing and the IAM, though, such trust is elusive.
A year ago, at the Farnborough Air Show in England, just a month after Spirit sealed its deal with the IAM, Boeing's McNerney was decidedly cool to the suggestion that the agreement might serve as a model for Boeing.
Even though Boeing has so much work that it looks like its Puget Sound-area factories will hum through the end of the decade, the idea of firmly committing to protect jobs here was still a stumbling block.
"I don't think we're ever going to give up our rights to place work where it makes the most sense," McNerney said then. "I want an agreement that makes us competitive and that doesn't give up fundamental management rights to run the company. Guaranteeing work, in most forms, runs that risk."
A year on, as the NLRB case frays fragile labor relations ahead of the looming IAM contract negotiations in 2012, Boeing officials said that still sums up the company's position.
Dominic Gates: 206-464-2963 or firstname.lastname@example.org
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