Boeing Could Win Big in Today's Union Vote

It's a rare day indeed that I get to say something like this, so I'm going to make the most of it: Today's contract vote by Boeing's (NYSE: BA  ) labor union in Seattle could be really good news for the aerospace giant.

As you've probably heard by now, Wednesday is the day that 20,000 Boeing employees, members of the International Association of Machinists and Aerospace Workers (IAM) in and around Puget Sound, go to the polls. They'll be voting up or down on a proposed eight-year extension of their contract with the airplane manufacturer.

Like its new 787-9 Dreamliner, Boeing stock could be poised to take off. Source: Boeing

If they approve the contract, Boeing will almost certainly choose to reward them by agreeing to build its new 777X airliner in Washington state -- especially given that the state just offered the company $9 billion in tax breaks if it does decide to build the plane locally. If they vote the contract down, though, well, you remember 2008, right? And the 52-day strike that Boeing provoked the union into?

That would be bad news indeed.

History needn't repeat
Fortunately, I don't think that is the way this one is going to go this time. To the contrary, if you've been reading the postings of the leaders of IAM District 751 lately, the union actually sounds downright conciliatory. Portraying today's vote as "a crossroads" for the union and its members, IAM's leaders accentuate the positives of Boeing's new proposed contract:

  • Eight years of "job security" for Boeing workers. 
  • Eight years of Boeing's 32,000 machinists knowing for certain where they stand, in a contract that will run from the point the current contract runs out in 2016 all the way into 2024 
  • Immediate signing bonuses of $10,000 for all employees
  • Cost of living allowances (dubbed COLA) through 2024
  • 1% general wage increases on top of COLA, every other year
  • Continuation of current pension policy through 2016, followed by a new defined contribution plan in 2017, in which the company will contribute 10% of salary into a 401k-type plan for current employees in each of 2017 and 2018, 6% in 2019, and 4% per year thereafter (New hires get 4% in all years)
  • Other benefits

While IAM leadership emphasized that approving the contract "is an individual choice for each and every member" of the union, it's pretty clear that it thinks the deal is good as it stands. But for shareholders, the key point is that this is also a good deal for Boeing.

Turnabout really is fair play
Today's vote comes five years after a hard-fought contract in which IAM basically threatened to bleed Boeing dry unless it caved -- postponing production of the new 787 Dreamliner and denying Boeing the cash flow it needed to live. By some estimates, that dispute cost Boeing $5.2 billion, and perhaps $535 million in profits, in revenue lost or postponed. But with 787 sales in full swing, and Boeing's backlog robust, the company's in fine financial fettle today -- and positioned for a win.

Today's vote gives Boeing a chance to make its union happy and to keep it that way for years, with no risk from further IAM strikes for nearly a decade. The shift from defined benefit pension programs to defined contributions and the de minimus pay raise guarantees (only 1% every two years!) further promise to boost the company's profits, and should make planning for the future a snap.

If all goes as planned in today's vote, it should be pretty easy for investors to decide to buy Boeing, too.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 13, 2013, at 1:21 PM, davej0987 wrote:

    you leave out the part about the lost of retirement, boeing gives $2000 to replaced $1100 , no way you can make $1100 a year off $2000....

  • Report this Comment On November 13, 2013, at 4:18 PM, foolishddaryl wrote:

    The deal by Boeing was a big slap in the face

    Nothing but takeaways

    They tried bribing Boeing workers with a big singing bonus, but Boeing IAM members don't want signing bonuses. they don't want 400% increase n healthcare they don't want the pension to end and replaced by a weaker alternative

    Now that they have offered such a crappy contract how do they think moral will be for the remainder of the years they are forced to stay in Puget Sound

  • Report this Comment On November 13, 2013, at 10:40 PM, sciencedave wrote:

    The deal offered is better than almost every other deal workers get today. Pensions and colas are old school and on the way out. The government (therefore all taxpayers) has been subsidizing Boeing for years as Boeing agreed to outrageous union contracts. The company would be more profitable and a much better investment if wages and benefits were lower. The price of those planes should be much lower....and more competitive globally.

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