SEATTLE Boeing's engineering union has decided to drop its demand that its labor contract include a pension for new workers, a move that could hasten a deal as the two sides resume bargaining on Wednesday.
The decision comes after one bargaining unit last week narrowly accepted Boeing's (BA.N) contract offer without the pension for new hires. The other unit narrowly rejected the contract, sending them back to the bargaining table.
"The pension is dead," said Tom McCarty, president of the executive board of the Society of Professional Engineering Employees in Aerospace (SPEEA), in an interview with Reuters.
"We're not going to try to breathe new life into it."
The pension became the key flash point in talks between SPEEA and Boeing that began in April. Boeing is now reeling from the grounding of its 787 Dreamliner nearly six weeks ago, a rare event that has halted delivery of the new plane to customers and is costing Boeing an estimated $200 million a month in lost income and potential compensation to airlines.
SPEEA's technicians and Boeing will resume bargaining Wednesday to replace a four-year agreement for 23,000 workers that expired in October. An extension ran out in November, leaving the union free to strike, if members authorize it.
In February, as the crisis with the 787 deepened, SPEEA offered to extend the current contract, which includes 5 percent annual raises, for four more years. Boeing agreed, but insisted on its proposal to eliminate the pension for employees hired or re-hired starting March 1.
SPEEA members already have a 401(k) plan that pays a match up to 6 percent of their annual salary. Boeing's offer would enhance that plan, while cutting out the pension.
The union said this change would reduce the value of a worker's compensation by about 40 percent over the span of a career.
"It's a lot less than the existing pension and 401(k)," union executive director Ray Goforth said in an interview.
Boeing says controlling pension costs is crucial to future investments in new jet designs and products.
"The retirement portion of the offer is incredibly important for the company and that has not changed," as a result of the vote, said Boeing spokesman Doug Alder.
Current employees would keep their pension, and it would grow by 10 percent over the four-year life of the contract, he said.
"We just need to get a grip on future hires so we can get a grip on future investment," Alder added.
SPEEA's 15,500 professional engineers, who design jets, approved the contract by a vote of 54 percent to 46 percent on February 19.
The 7,500 technicians, who are lower-paid and handle issues that arise in production, rejected the contract by a vote of 53 percent to 47 percent. The contracts are nearly identical and are negotiated at the same time.
Both bargaining units also authorized a strike, but workers cannot strike while a contract is in place, so by accepting Boeing's offer, the engineers made their vote moot.
Technical workers earn less than engineers, about $79,000 a year on average, versus $110,000. McCarty said they may have voted against the offer because lower salaries gave them greater concerns about their retirement savings.
He noted, however, that employees last year did not use $12.5 million in 401(k) match money they could have had if they fully contributed to their retirement accounts.
McCarty said that even though the split vote was "the worst outcome," the union would support the techs and "press the company for some consideration" perhaps in the way raises are awarded or transparency in promotion and performance reviews.
While the split vote might appear to give Boeing more leverage in the talks, he said, the union was as strong as ever.
"The company might assume that a lot of the techs are fine with the offer," he said. "They'll speculate that if we revote the contract, at the end of this week, it will pass, having seen the profs pass it," he added, referring to the professional engineers.
"The company may be correct in that assumption that people might be less willing to press their case," he said.
But he said a strike by technicians could disrupt production of 737s, the cash cow for the company. If the workers walk out, the 737 line "would grind to a halt in a few days."
In a forthcoming SPEEA publication, McCarty writes that after the vote, "the bargaining leverage of the technical bargaining unit is stronger than ever and everyone should understand that."
The union has spent recent days conducting an online survey of technical workers to see what they would consider worth striking over. Restoring the pension for new hires is among 12 issues on the survey, even though McCarty said it won't be pursued.
Also included: Increases in 401(k) contributions, stronger protections against outsourcing and use of outside contractors, a larger ratification bonus and a lump sum in the 401(k) tied to meeting production goals.
The talks are set to resume Wednesday morning at a hotel near the Seattle Tacoma International Airport, and will include federal mediators, who joined the bargaining in December.
(Reporting by Alwyn Scott; Editing by Bob Burgdorfer)