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Boeing takes a friendlier approach with latest union contract for engineers

February 15, 2020, 12:28 AM UTC

Boeing’s new leadership is moving quickly to embrace the company’s engineering roots and reinvigorate the white-collar workers who design and develop its sophisticated planes, satellites, and missiles.

Late Thursday, the company announced a proposed labor-friendly contract extension through 2026 with the Society of Professional Engineering Employees in Aerospace (SPEEA), the union representing about 18,000 of its engineers and technical employees. In a memo to workers Friday morning, Boeing’s chief engineer, Greg Hyslop, said the company is committed to strengthening its engineering chops. 

During the past year, the aerospace giant has been publicly hammered by industry analysts and members of Congress for fostering a finances-first culture that laid the seeds for two crashes of the 737 Max five months apart that killed 346 people. Internal communications by Boeing workers indicate the company downplayed the significance of a new flight control system to avoid regulators requiring additional pilot training, which would have made it more expensive for customers to add the single-aisle airplane to their fleets. 

Since the mid-2000s, Boeing leadership has taken a mostly antagonistic approach with labor. The company has moved thousands of jobs out of Washington to South Carolina, California and Oklahoma, among other states, depleting union ranks, and also forced contract concessions from unions while threatening additional job moves. During the same years, the company recorded record-high profits and returned billions of dollars to shareholders through stock buybacks and dividends. 

The company’s stumbling response to the 737 Max crisis and mounting evidence that its corporate culture played a significant role in the two crashes–in October 2018 and March 2019–prompted Boeing’s board to fire CEO Dennis Muilenburg and replace him with board member David Calhoun, who took the reins Jan. 13. Industry watchers questioned whether Calhoun could return Boeing to its engineering roots. He had risen through the executive ranks at General Electric, where he typified the hard-charging, shareholder-first approach for former GE CEO Jack Welch.

Calhoun was quiet Friday, letting Hyslop speak for corporate leadership. “Boeing is an engineering company,” the chief engineer assured employees in his memo. 

Management came to recent talks, which were held in secret, to collaborate, not antagonize, Ray Goforth, executive director of SPEEA, told Fortune.

Paid family leave, not new contract terms, prompted the discussions between the union and management. Boeing had used a loophole to exempt union-represented workers from access to Washington State’s Paid Family and Medical Leave act, a bill passed in 2017 that grants workers 12 weeks of paid time off to care for newborns or other family members. 

Boeing used the exemption as leverage to squeeze further concessions from SPEEA, Goforth says. “They offered to stop withholding it if we would agree to significant cuts to our medical benefits.” 

In 2017, the company posted a 9% profit margin and spent $9.2 billion repurchasing shares. The following year, it spent another $9 billion on buybacks and booked a 10.3% profit margin, according to company filings with the U.S. Securities and Exchange Commission. 

The union rejected the concessions. 

“For the last several years, there’s been a reflexive anti-union hostility that has colored all of our discussions,” Goforth said. In the most recent talks, “that was largely, if not completely absent, and we were focused more on solving the problems that we could both agree needed to be solved.”

The proposed contract makes the state family leave benefits available to SPEEA members, as well as paid paternity and maternity leave provided by the company. It also scraps the formula for calculating raises, which the union had objected to, for guaranteed minimum raises through 2026 (5.5% this year and next year, 5% in 2022 and 4.5% through the remaining four years).

Additionally, the contract would increase the annual bonus payout formula and provides a zero-premium health care option for union members who make less than $100,000. Various other benefits in the proposed agreement include student loan repayment and medical benefits for retirees. 

Furthermore, medical costs for SPEEA members would not increase until 2023, and would still be among the lowest of all Boeing employees. 

Despite the friendlier negotiations, SPEEA’s two bargaining unit councils-—one representing engineers and one for technical staff—voted against endorsing the offer. However, they did not oppose the terms. It’s unclear why they declined to do so. One council member told the Seattle Times that negotiating now—two years before the current contract expires—weakened the union’s negotiating position.

Ballots to approve or reject the offer will be sent to members later this month and must be submitted by early March. 

Management’s about-face notwithstanding, it’s too soon to know if its attitude during contract talks is a long-term culture shift or a short-term play to placate engineers at a time when the company’s future hangs in the balance. The Max remains grounded, nearly a year since regulators declared it unsafe to carry passengers. American Airlines on Friday again delayed when it expects to return the 737 Max to service. It’s now slated to be put back in service in mid-August.  

Beyond the Max crisis, Boeing faces critical competitive challenges from its European rival, Airbus. Aerospace analysts say Boeing must plug the holes in its product lineup or risk being relegated to a distant second place for the next 10 or even 20 years. 

“The fact that (management) agreed quickly (to favorable contract terms) seems to me that they want to send a message out that ‘we value the engineers,’” says Leon Grunberg, a University of Puget Sound professor who has researched Boeing’s workplace culture. 

Boeing management did not have to open contract negotiations. The current agreement was passed in 2016 and runs through 2022. Company leaders could easily have said getting the 737 Max back in the air is the priority, he says. 

“They are clearing the decks, saying that they are taking engineers’ concerns seriously and putting them ahead of winning (737) customers back and other economic considerations,” Grunberg says. 

Still, neither he nor Goforth would rule out that Boeing executives will stop making nice if and when the company recovers. 

“The one thing you can say and always be correct is that Boeing will do what (leadership believes) is in Boeing’s interest,” Goforth says. 

By that measure, it seems for now that Boeing executives believe repairing relations with engineers is in the company’s interest.

Correction: An earlier version of this article misidentified the university where Prof. Leon Grunberg works. It is University of Puget Sound.

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