Boeing sends machinists final offer

[August 29, 2008]  NEW YORK (AP) -- Boeing Co. delivered a final contract offer to its union machinists Thursday that it said would boost pay by 11 percent on average over three years, the latest effort by the airplane maker to avoid a strike that could cost it millions of dollars a day.

Chicago-based Boeing said the proposed contract was its "best and final" offer and would increase compensation for the more than 27,000 union workers in Washington state, Kansas and Oregon. It includes a $2,500 bonus for workers if the contract is ratified by next Wednesday -- the day the current contract expires and a union vote is scheduled.

The company said it had withdrawn certain proposals that drew concern from the union, including plans to cut early retiree medical coverage and create a new defined-contribution retirement program for future employees.

"This is, as we told the union leadership this morning, our best shot," Doug Kight, Boeing vice president of human resources, told a news conference Thursday. He called the offer "the best package of pay and benefits in the aerospace industry."

Union leaders and members have a few days to scour the 300-page proposal.

"They're still going through it, every detail, line by line," said Connie Kelliher, a spokeswoman for the International Association of Machinists and Aerospace Workers District Lodge 751. Kelliher added that union leadership could respond to Boeing's latest proposal by Friday.

The two sides have been engaged in round-the-clock negotiations at a Seattle airport hotel since Aug. 21. The last round of negotiations, in 2005, led to a strike.

Peter Arment, an analyst with American Technology Research Inc., said Boeing currently has its largest order backlog, and that a strike would mean halting production and deferring revenue on the company's books.

"So even a small disruption of a week or two can cause a slippage in the delivery schedule," he said.

A strike could cost Boeing roughly $100 million per day in deferred revenue, Arment said.

Boeing's latest offer comes a day after the company received a counterproposal from the union, which asked for more money and stronger language about job security, according to Kelliher.

The company's latest offer includes proposed wage increases of 11 percent over three years, pension increases and a 3 percent cost-of-living adjustment that it said would total an average $34,000.

In its prior offer earlier this week, Boeing had bumped a proposed wage increase to 9 percent over three years and raised the basic pension benefit. It also included a yearly 3 percent cost-of-living adjustment.

The average Boeing machinist earns $27 an hour, or about $56,000 a year, before overtime and incentives.

In 2005, about 18,400 machinists in the Seattle area, Wichita, Kan., and the Portland, Ore., area struck for four weeks, forcing the company to halt production of commercial airplanes. The machinists assemble Boeing's commercial planes and some key components.

The union currently represents 25,000 Boeing employees in the Seattle area, around 1,500 in Portland and 750 in Wichita.

Boeing's commercial airplane manufacturing operation, based in the Seattle area, has led a resurgence by the company over the past two years amid heavy orders for the much-awaited and increasingly delayed 787.

Last month, the company said 787 production was following a revised schedule announced in April, and that the program was in the final stages of assembling the first airplane in preparation for a test flight.

But Boeing faces billions of dollars in anticipated additional costs and penalties, with three delays in the 787's delivery schedule that leave it more than a year behind the original schedule.

In July, Boeing posted a 19 percent decline in second-quarter earnings, partly because of late delivery of military aircraft and rising costs related to the 787.

But the company reaffirmed its forecasts for 2008 and 2009, saying its backlog of airplane orders had risen 6 percent to a record $346 billion.

Among its recent orders was one from American Airlines, which said this month it will buy six more 737s than planned, bringing the total number of the aircraft to be delivered in 2009-2010 to 76.

On Thursday, Boeing said EgyptAir had ordered two 777s worth $529 million at list prices.

Airlines, meanwhile, have been struggling with rising fuel costs. Several carriers have posted big losses in recent months and some have been forced to postpone aircraft deliveries.

___

On the Net:

http://www.boeing.com/2008negotiations/

http://www.iam751.org/contract08.htm

[Associated Press; By DANIEL LOVERING]

Associated Press writer Manuel Valdes contributed to this report from Seatac, Wash.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.