Real World Negotiating: Boeing vs. The IAM

by drjim on September 8, 2008

Boeing and the IAM are in labor negotiations

Boeing and the IAM are in labor negotiations

If you’ve been following the news lately, you are probably aware the that the International Association of Machinists (IAM) has gone on strike against the Boeing corporation. News reports are saying that Boeing stands to lose up to $100M every day that the machinists are on strike – wow, that’s a lot of money! Boeing’s and the IAM’s situation provides a unique ecosystem for us to peer into in order to watch a high stakes negotiation while it’s in progress. Both sides are actively maneuvering to boost their negotiating power and take power away from the other side so there is a lot for us to learn here.

What’s Being Negotiated? The IAM is negotiating a new 3-year contract with Boeing. Note that the contract is fairly short. Boeing likes it this way because they aren’t comfortable with their ability to predict the future and they don’t want to be required to keep a lot of union workers on staff if the market turns on them in the future.

What’s the Hang-Up? The usual key issues revolve around wages and health-care costs. However the big hang up has proved to be job security. Boeing’s new 787 Dreamliner program has shown that the company is willing to outsource much of the creation of parts to international suppliers and have local staff just be responsible for final assembly. The current conflict is a direct result of a disagreement over how much say the union should have in future Boeing decisions on how much work should be shipped out to other suppliers.

Why Is This Such A Big Deal? Right now suppliers can deliver parts directly to the Boeing assembly lines. The union workers fear that the next step will be for the suppliers to install their parts directly onto the plane – thus removing the need for the union workers.

What kind of interesting tactics have been used during this negotiation? What’s caught my eye is that both sides seem to be trying to influence outside parties in order to apply pressure to the main negotiating parties. Case in point:

  • Boeing presented a counter proposal to the union just before the Labor Day weekend. It was clear that they were hoping that this proposal would generate a great deal of family dinner table conversation. Boeing was hoping that the machinists wives/husbands would exert pressure to accept the contact because a strike would become very expensive very quickly in a world with $4/gallon gas.
  • The IAM’s president had met with Boeing’s Chairman months ago and warned him that the outsourcing issue would be an important one. Then he told the newspapers that he had told him this.

So what happens now? We’ll have to wait and see but it should be quite interesting. Boeing has a backlog of 3,600 planes that are already late for delivery. This strike could cause those planes to slip even more. The union thinks that they have enough leverage that if they have to stay off the job until 2009, they are willing to do so. Let’s see who does what next!

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