Issue of the week: The costs and fallout of the Boeing strike

For the second time since 2005, aircraft assembly workers at Boeing last week went on strike, and all signs point to a lengthy walkout, said Christopher Hinton in Marketwatch.com. The 26,800-member International Association of Machinists and Aerospace Workers is seeking a pay raise of at least 13 percent, a boost to the union pension fund, and a freeze on health-insurance contributions by employees. The job action is sure to further delay deliveries of Boeing’s new 787 Dreamliner, which are already two years behind schedule. “Boeing has already accrued large fines from its customers because of delivery delays for the next-generation wide-body plane.”

In fact, said J. Lynn Lunsford in The Wall Street Journal, the 787 may be an even bigger flashpoint between Boeing and the machinists than wages or health care. Boeing wants to outsource much of the assembly of the 787 to non-union workers outside the U.S. Using outside contractors, “Boeing has been able to reduce the time it takes to build some of its jets by more than 50 percent.” But the growth in outsourcing has been accompanied by a steep decline in union jobs. “It seems like every time we make a big leap forward in efficiency, Boeing finds a way to send more jobs to outside contractors,” said veteran machinist John Jorgensen. The issue has been festering since 2002, said James Wallace in the Seattle Post-Intelligencer, when the union grudgingly agreed to allow greater use of outside contractors. Since then, anger among union members has been building. “Everyone is upset,” said one longtime union member. “They are as angry as I have ever seen.”

Emotions aside, the company is facing enormous pressure to settle, said James P. Miller in the Chicago Tribune. During the past six contract negotiations with Boeing, the machinists have struck three times, and “those strikes lasted four to 10 weeks.” Another lengthy walkout might convince Boeing’s customers to cancel their 787 orders and turn “to Boeing’s European rival,” Airbus, for new orders of commercial passenger and cargo jets. Experts say a prolonged strike could cost Boeing $100 million a day in lost revenues—a prospect that could bring Boeing back to the bargaining table.

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This strike is about a lot more than just one company, said Tim Klass in the Associated Press. It is already hurting Boeing’s suppliers. Spirit Aerosystems, for instance—which makes fuselages, wing struts, and engine covers for various Boeing models—has shortened the workweek for most of the workers at its Wichita plant. But the implications are far broader than that. Boeing is one of the largest exporters in the U.S., and a falloff in aircraft deliveries would widen America’s already-gaping trade imbalance with the rest of the world. “If it’s a month long, you’ll definitely see a blip” in trade gap figures, said industry analyst Richard Aboulafia. “Two months isn’t the end of the world.” But analysts say a strike of three months or more could really hurt. “Exports are one of the few bright spots in the nation’s economy.” If the walkout drags on, “that could change.”