In an historic move, Machinists union members narrowly accepted Boeing's new contract offer Friday to build the 777X passenger jet in Washington state, effectively dashing dreams of nearly two dozen other states, including South Carolina, hoping to land the lucrative job-producing deal.
The International Association of Machinists voted 51-49 percent to approve the labor contract extension that ensures labor peace through 2024, but it means their traditional pension plan will be replaced with a 401(k)-style savings plan.
Boeing promised work on the new jetliner would stay in the Pacific Northwest if the union approved the contract extension, which begins in 2016 for eight years. National IAM leaders bypassed Washington state union bosses and called for the vote on the contract offer, leaving deep divisions among rank-and-file members as evidenced by the outcome.
"The impact of this agreement extends far beyond IAM members who voted today," said IAM International President Tom Buffenbarger in a statement. "For decades to come, the entire region will benefit from the economic activity and technological innovations that will accompany the production of the 777X and 737 MAX."
In addition to securing production of the 777X fuselage and carbon-fiber wings for the Puget Sound area, the agreement reaffirms Boeing's commitment to maintain 737 MAX production in Renton, Wash., through 2024. Analysts estimate the two programs could account for as many as 20,000 direct and indirect jobs and billions of dollars in economic activity, according to the IAM.
"The 777X is not just Boeing's newest wide-body aircraft," Buffenbarger said. "In materials, technology and manufacturing skills required, the 777X represents a quantum leap in aviation history. IAM members have built Boeing aircraft in Puget Sound for more than 60 years. This agreement assures they'll continue building them for decades to come."
The proposal by Boeing also includes changes to IAM members' defined benefit pension plan. While the plan will continue to pay full benefits to all members vested in the plan, Boeing will cease making contributions and members will instead be covered by a company-funded 401(k) plan and a separate savings plan that includes matching company contributions, according to the IAM statement.
"After weeks of robust debate, IAM members at Boeing made decisions they felt were in the best interest of their careers," Buffenbarger said. "Despite individual differences, I believe this vote preserves thousands of good-paying IAM jobs, while assuring the success of the 777X program."
Chicago-based Boeing Co. hailed the razor-thin vote as a victory for the company, employees and Washington state.
"Thanks to this vote by our employees, the future of Boeing in the Puget Sound region has never looked brighter," said Boeing Commercial Airplanes President and CEO Ray Conner. "We're proud to say that together, we'll build the world's next great airplane - the 777X and its new wing - right here. This will put our workforce on the cutting edge of composite technology, while sustaining thousands of local jobs for years to come."
Washington Gov. Jay Inslee said the union's acceptance of the contract offer secured the Evergreen State's future as "the aerospace capital of the world."
"With the work the Legislature did in November and (Friday's) vote, Washington state has shown it is the only place to build this next-generation jetliner," Inslee said. "That legislation has important protections for taxpayers and for Machinists, and we will make sure the company keeps its commitment and that these jobs remain in Washington state for the life of the airplane."
Washington lawmakers in November approved $8.7 billion in tax breaks for Boeing through 2040, extending current incentives that expire in 2024.
Aviation analysts Saj Ahmad with StrategicAero Research in England said union workers made a wise decision.
"Having 777X in Everett capitalizes on the labor pool skills, the matured and robust supply chain and the de-risking of the entire 777X program so that delays and debacles that hounded the 787 and 747-8 are mitigated against," Ahmad said. "That is the sort of leverage that the union workers have, and they need to realize that they hold the key to the 777X's success and getting out of the starting blocks on a high and strong note."
He said union workers will get a 15- to 20-year run of the wide-body program that will deliver record earnings and will also benefit from the long-term security of the 737 MAX and its eventual successor.
South Carolina, while never officially acknowledging it was in the running for the 777X, will still see Boeing growth.
The company recently leased nearly 500 acres for future expansion at Charleston International Airport beside its 787 Dreamliner, non-unionized factory. The aerospace giant has been mum on its plans for the additional land.
Aviation analysts, including Ahmad, believe Boeing intends to move its entire 787 production line to North Charleston. A decision on where the 787-10 will be produced will be made by March, according to Jack Jones, vice president and general manager of Boeing South Carolina. Ahmad and others believes the 787-10 will be built in North Charleston.
Also, a wetlands mitigation plan filed in late December for the new acreage Boeing recently leased shows the flight line for the 787 increasing from seven stalls to 16 stalls. It also shows the final assembly building, where the 787 is assembled from parts produced locally and across the globe, will be extended by nearly two-thirds. A new paint facility will be built and open by 2016 to handle two planes at a time.
In all, Boeing plans to add 3.8 million square feet in North Charleston. It already has more than 2 million square feet at the airport campus. It also has other facilities in Palmetto Commerce Park, including an interiors fabrication plant for the 787 and a rising propulsion factory for the 737 MAX.
Boeing employs 6,600 people in North Charleston with the promise of 2,000 more by 2020.
North Charleston will still get some of the 777X work. The company announced in October some of the detailed design work for the new plane will be performed in the Charleston area, but it did not say how many jobs it will bring.
Reach Warren L. Wise at 937-5524 or twitter.com/warrenlancewise.
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