Boeing Wins!

The union vote was close, but Boeing's victory was huge.

Jan 4, 2014 at 10:00AM

Images
Boeing's planned 777X is a big plane. But it's small compared with the size of Boeing's historic win in Friday's union vote. Source: Boeing.

The vote was close -- just 51% to 49%. In contrast, the size of Boeing's (NYSE:BA) win in yesterday's union vote in Seattle was so huge, it's hard to overestimate. Here are the key takeaways.

Pensions
The Seattle branch of the International Association of Machinists and Aerospace Workers -- Boeing's largest union, with 21% of its workforce participating -- has now joined Boeing's second largest union, the Society of Professional Engineering Employees in Aerospace in agreeing to give up guaranteed pensions for life. 

Going forward, pensions for current employees will be "frozen" at the end of 2016. After that, retirement benefits will accrue in the form of 401(k)s -- and new hires will have only 410(k)-like plans available to fund their retirements.

Needless to say, this is going to be a big weight off the minds of Boeing's accountants, who up until now have had to weigh every decision they make in light of the company's $68 billion-plus pension obligation to its workers. That load just got a whole lot lighter.

Paychecks
Another big benefit to Boeing is that the IAMAW has agreed to lock itself into a decade-long stretch of exceedingly modest wage increases. On average, Boeing machinists can look forward to about a half-a-percentage point increase in wages (plus cost-of-living adjustments) annually from 2016 through 2024.

In competing against established rivals lacking such guaranteed wage-price stability over the next decade, such as Airbus (NASDAQOTH:EADSY), Embraer (NYSE:ERJ), and Bombardier, that's going to be a huge advantage for Boeing. It will enhance the company's bargaining position when negotiating the price of its airplanes. It will definitely improve Boeing's ability to earn beaucoup profits when it sells those planes to its customers.

Predictability
And what did Boeing have to give away to win these concessions from labor? Very little, actually. In exchange for getting the union to give up its pension guarantees, Boeing must contribute 10% of salary into a 401(k)-type plan for current employees in each of 2017 and 2018, then 6% in 2019, and 4% per year thereafter. New hires get 4% in all years.

Meanwhile, ensuring minimal wage growth over the next decade cost Boeing $10,000 in upfront signing bonuses for each of its machinists, plus a further $5,000 due in 2020. From Boeing's perspective, that's definitely a worthwhile investment.

Oh, and yes -- Boeing did throw in a better dental plan as well.

Dentures

What? You say you want a raise? How about a nice set of dentures instead? Source: Wikimedia Commons.

Foolish final thought
And as for the Holy Grail of all this negotiating? Boeing's promise to build the 777X in Seattle, now and for the foreseeable future? Well, Seattle is where most of Boeing's best and most experienced workers are living and working already. Honestly, while guaranteeing that these jobs stay in Washington state was the union's main objective in voting to ratify the contract, I doubt Boeing itself will see this as much of a concession at all -- especially given that Washington has promised the company $9 billion in tax breaks to build the plane in-state.

Long story short, Friday's vote was a clear and convincing win for Boeing and its shareholders. As for the workers, their best chance of coming out ahead in this vote may be to rush right out and buy some Boeing stock for themselves. After all, as Boeing Commercial Airplanes President and CEO Ray Conner exclaimed after hearing of the voting results: "Thanks to this vote by our employees, the future of Boeing in the Puget Sound region has never looked brighter."

I imagine that right now, a lot of Boeing shareholders would agree with that statement pretty emphatically.

Oops! Did you forget to save for retirement?
Boeing's pensions may be going the way of the dodo, but they're just one leg of the stool that supports a worker's retirement. Personal savings accounts, like the 401(k), are another. But the one everyone's worried about is ... Social Security. In our brand-new free report "Make Social Security Work Harder For You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Embraer. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers