Boeing braces for battle—with its own union

But the Cactus Moon isn’t just a watering hole—it’s a great forum for learning about what’s gone wrong at the Boeing Co. As a favorite hangout for retired and mainly boomer and Gen X workers from the planemaker’s nearby Everett plant, the place is a fount for up close and personal accounts of a once-fabled culture’s decline from the people who’ve lived it.

They called the old-timers “the gangsters,” says a genial Cactus habitué at the bar whom I’ll call “Freddie the Fastener.” Sipping a Bud Light, Freddie recounts that he spent 34 years at Boeing as a machinist on the 747 and 767 programs—his proud craft, operating the three-story-tall Gemcor machines that fasten the wing beams to the panels. Freddie saw his employer go from something akin to a family business with layers of oversight at every turn, to a place where pensioners saw their benefits slashed, and left in droves. The production gaffes that caused the infamous 737 Max door-plug blowout over Portland, Ore., on Jan. 5 didn’t surprise Freddie. “The workers around me kept getting younger and younger, but instead of giving them more supervision, Boeing kept cutting safeguards,” he says. “I told my bosses: ‘If you do this, you’re going to have problems.’ Their actions raised the risk of disasters like the one that just shocked the world.”

Today, Boeing is a colossus in crisis. Its myriad problems all arise from the long-hidden failings in its quality control regime that so scared Freddie in his last years at Everett, and that sundry whistleblowers have flagged since. For at least a decade, its management put speeding production to boost profits over sustaining the ironclad processes and procedures essential to building aircraft featuring the highest levels of reliability and safety. Says a top aerospace executive: “They focused on financial returns and not actively promoting safety.”

But while safety has dominated the headlines, there’s another vexing issue facing Boeing that threatens to explode this summer. On March 8, Boeing began bargaining its first full-scale agreement in 16 years with the International Association of Machinists and Aerospace Workers (IAM), the union that numbers 32,000 at Boeing and accounts for over half of the entire U.S. workforce in the commercial airplanes division. Put simply, this is America’s most important labor negotiation in decades.

Boeing is on its heels. The forces in the union’s corner are powerful, and have only grown more so as sundry quality issues plague the aerospace giant. The story of how the union in recent years battled Boeing over its removal of in-person inspections on the factory floor, finally taking its case to the Federal Aviation Administration, and how that conflict is shaping its current demands, is potentially central to Boeing’s future. And the contract negotiation’s outcome could well determine whether Boeing reaffirms its traditional identity and culture by agreeing to build its next clean-sheet plane in Washington’s Puget Sound, home to its giant Renton and Everett plants, or seeks lower-cost options in competing states.

Boeing vs. its union

In an interview with Fortune at his headquarters, on the second floor of a nondescript low-slung office building in a modest Seattle suburb, IAM District 751 president Jon Holden started by slamming the ultra-hardball tactics Boeing deployed in the past two negotiations. “In 2011, Boeing threatened to move 737 production somewhere else, like they’d just done by moving part of the 787 output to [North] Charleston,” he says. That contract was supposed to run from 2012 to 2016. “But it was just a year and 10 months later that they threaten to move the new 777X [then in development] to another state.” At the time, Boeing was tightening the vise by having an internal lobbyist fly around the country shopping for the best deals in Texas, Utah, and South Carolina.

Holden continues the history of hurt: “In 2013, they demanded that we extend the contract all the way until late 2024 in exchange for making the 777X in Everett. But this time, the sacrifice was giving up our defined pension plan and a massive medical care cost-shift to our members and stagnating wages for 10 years and nine months. That’s what started to turn our relationship so negative, their threats to take our livelihood away.” A Boeing spokesperson responded: “Over the last 10 years, our machinists’ pay growth has outpaced inflation every single year, even in the last few years when inflation was high.”

Holden now wants Boeing to agree to something it’s never consented to before: pledging to build an all-new aircraft in a specific place. (The 777X is a larger derivative of the 777.) “We believe it has to happen here,” he says. “I have to get that security piece, and it can’t be up to them at some point in the future to threaten us to move it somewhere else. This is our only opportunity, and the time is right now.” In addition? Wage increases totaling 40% over a three-year contract. The chief also reckons that the IAM deserves a seat on Boeing’s currently 13-member board.

An IAM team of 40 negotiators has formed half a dozen groups to bargain with their Boeing counterparts on all different aspects of the work rules and money issues. The first major day of reckoning is July 17, when IAM members will convene in T-Mobile Park (capacity: 50,000), home field to the Seattle Mariners, for a vote on authorizing management to call a strike if the two sides can’t reach an agreement before the contract expires. It’s getting close to crunch time: The contract deadline falls on Sept. 12, and marks one of the key dates in the annals of labor-management dealmaking. If membership votes yes on July 17, and the talks remain deadlocked at midnight on Sept. 12, the IAM leadership can launch a strike, a weapon it last unsheathed in 2008, emptying Boeing’s Seattle-area plants for nearly 60 days.

Holden says he’s got high hopes that the two sides can reach an agreement and avoid a strike. “We want Boeing to be profitable; we need a healthy Boeing,” he avows. But Holden has rallied his troops to endure a long walkout if that’s what it takes to secure the bulk of their agenda. For over two years, he’s been exhorting his members to save part of their salaries to tide them through an extended period sans paychecks.

It’s a theme the IAM head likes repeating: “We have to save Boeing from itself.” Besides new benefits that he believes would once again encourage longevity, Holden reckons that a big part of this rescue operation involves gaining authority the union’s never had before: a role in setting the manpower and oversight for Boeing’s quality-control–troubled operation. “We’re proposing that we have the right to negotiate provisions that go into the safety and quality of the planes,” he says.

CEO Dave Calhoun hasn’t commented on how an agreement might influence Boeing’s cost structure. A company spokesperson told Fortune: “Both parties want to reach an agreement without a strike, and we believe in a path that brings balance. It’s safe to say we’ll give outstanding pay and benefits.” The spokesperson added, “We’re very committed to Puget Sound, where we have five aircraft programs and 4,900 planes in backlog,” also noting that Boeing expects the IAM to advocate for a role in quality control.

To grasp why the IAM’s seeking these new powers, it’s crucial to examine the work mechanics perform; the crash- and pandemic-driven demographic upheaval in their ranks; and the war between the union and Boeing management over quality control that started in 2017, and remains only partially resolved.

Boeing’s union boasts a proud, militant heritage—and members still fume over their skewering on the last contract

The IAM dates from 1888, when 17 machinists gathered in an Atlanta railroad pit under cloak of darkness, to form a union. In the early days, members were called “boomers,” part skilled craftsmen, part vagabonds who followed the tracks from one boomtown to the next, laboring in shoe factories and foundries. Today, the IAM encompasses around 600,000 active or retired members in the U.S. and Canada, working in such industries as railroads and airlines, and besides Boeing, at such aerospace giants as RTX, Lockheed Martin, and NASA.

Boeing’s machinists still rank among the crème de la crème of America’s industrial workforce, given their skills in crafting the biggest and most complex products made in America. They are basically divided into two groups. The first are the workers who build the planes. They perform the riveting that joins the aircraft’s sections; attach the wings to its body deploying fasteners; put down floorboards; and install insulation blankets, passenger seats, and racks holding computer equipment. This isn’t high-volume automaking; assembling these wondrous flying machines requires lots of virtually artisanal workmanship. Boeing’s assembly lines feature low levels of automation; it’s all about the high-touch workmanship performed by mechanics.

The second group: quality assurance inspectors. It’s the QAs who ensure that the building crews are doing their jobs correctly. They perform in-person checks on everything from the torque applied to a nut to wiring connections to debris strewn in areas of the plane about to be closed up. The QAs are responsible for verifying that the parts and systems installed in the aircraft conform to the design laid out in the production certificate approved by the FAA, and that all the work is performed according to the processes and procedures described in Boeing’s quality manual, a document also approved by the aerospace watchdog. In-person inspections by highly trained and qualified personnel are required under the Code of Federal Regulations issued by the FAA. 

A major breach over quality control dividing Boeing and the IAM surfaced in 2018. In November of that year, management presented the IAM with a PowerPoint outlining a sweeping revamp of the manufacturing system. The idea was to automate, simplify, and streamline traditional processes in the lean manufacturing mold. A few years earlier, Boeing had launched a similar regime at its non-union plant in North Charleston, and it was now coming to Renton and Everett. A central plank: empowering the mechanics building the planes to inspect their own work as they did their riveting, shimming, or fastening. For many jobs, the new regime would eliminate the long-standing checks on their finished work performed by quality assurance inspectors.

Hundreds of members packed the union halls in Renton, Everett, and Auburn to denounce the initiative. The resistance rallied under the banner, “It’s not okay to cut QA!” The rank and file especially resented that; according to IAM leadership, Boeing had already been nixing inspections in Renton during 2017 without informing the union. A program architect was Ernesto Gonzalez-Beltran, the newly hired VP of total quality, who had spent 24 years in automotive manufacturing positions at Ford and more recently Toyota.

In January of 2019, Boeing gave the program, called Quality Transformation, or QT, a splashy debut at the Everett facility. Gonzalez-Beltran hosted the acclaimed Seattle Times reporter Dominic Gates—who would go on to win a Pulitzer Prize for his coverage of the 2018 and 2019 Boeing 737 Max crashes—photographer in tow, on a tour to demonstrate how Boeing was deploying smart tools and digital technology to speed production while lowering defects. “By allowing inspectors to verify their own work, wait time is eliminated,” Gonzalez-Beltran explained. The smoother workflow would help mechanics get it right the first time. Gonzalez-Beltran asserted that the QAs’ inspections were “only 87% effective,” and predicted that the innovations would bring “radical improvement” in overall quality. “I’ve seen the future,” he declared, “because I’ve seen it in the auto industry,” adding that “when there are consistently stable processes, there is no value added from a second set of eyes.”

The program called for reassigning 900 of the 3,000 quality inspectors over the next two years to other jobs, such as finding the root causes where defects were most frequent. QT ended the in-person QA checks on the vast majority of shimming for all programs, the process of filling tiny gaps between sections of the plane with metal slivers often the width of a human hair; shimming reduces the stress the airframe encounters while in flight. Instead, the mechanics ferried data on the size of the gaps, the tools used, and other aspects of the job to the QAs, who no longer verified the work on-site and in person. The IAM also charges that Boeing removed QA inspections from “close tolerance” holes, where mechanics zap rivets to join different parts of the skin covering the primary structure, as well as many “functional tests,” final checks on major systems once the plane’s completed, including engines, hydraulics, flaps, and rudders. (Boeing says that it restored the close-tolerance-hole inspections in the 2019–20 time frame.)

According to the IAM, from 2017 to 2019 Boeing removed 3,200 inspections per plane on the 737 Max, lowering the total from 14,300 to around 11,000.

Holden denounced the plan, positing that it would cause lots of out of sequence work as planes moved down the line, and delay deliveries. “QT was quality suicide,” says one IAM member who fought the strategy. “It was just the Toyota guy’s plan to speed up production.”

To address these grievances, Boeing in April of 2019 agreed to allow an IAM committee to review all work “packages,” either in place or proposed, that removed inspections. If the IAM could show that the changes hurt quality, Boeing vowed that it would restore the eliminated QA checks, or cancel proposed packages. The IAM also won the right to bring objections directly to the FAA, without Boeing’s review. “When they just barreled forward, we turned to whistleblowing to the FAA,” says Holden. In Q3 and Q4 of 2020, IAM committee members filed four “Hotline” complaints to the FAA. They detailed 10 cases where Boeing had removed in-person QA inspections and replaced them either with sign-offs by machinists, or a system of random sampling.

In May 2021, the IAM secured a key ruling, called an enforcement investigative report (EIR). The FAA found that in all instances Boeing had eliminated the direct QA checks in violation of its rules, and, according to the IAM, the FAA effectively directed Boeing to reinstate the canceled inspections. Typical of the agency’s commentary: “The FAA found evidence that Boeing inappropriately assigned inspection authority to manufacturing personnel who did not have the appropriate training or certification.”

It appears that QT pretty much died in 2021 with the EIR ruling. Boeing never officially announced an end to the program, but by most evidence it backfired. According to whistleblower accounts, Boeing’s plants kept suffering from numerous quality issues, including defective parts that were mislabeled and actually installed in the finished planes; faulty firing mechanisms on many of the cylinders that deliver oxygen to face masks that fall from the plane’s ceiling in the event of an accident; and razor-short titanium slivers that lodged among the planes’ wire bundles, allegedly raising the risk of short circuits. (Boeing states that none of those issues affected safety, and all have been addressed.) Gonzalez-Beltran reportedly left in December of 2021. In January following the door-plug blowout, Boeing announced plans to greatly boost quality control oversight, and noted that it had already increased the number of QAs by 20% over the pre-COVID peak to around 3,600.

Meanwhile, aftershocks from the fatal Lion Air and Ethiopian Airlines 737 Max crashes, the latter in March of 2019, were whittling down an experienced workforce. That month, the FAA grounded all Max jets, a ban that lasted until December of 2020. Prior to the COVID outbreak, Boeing had moved 737 workers to other programs. Then the outbreak that hammered airline traffic by 96% caused big workforce reductions. Veteran machinists, no longer padding their pensions by staying longer, grabbed the rich retirement packages and departed en masse. All told, around 6,000 IAM members left, reducing their ranks from 2019 to 2021 by almost 20%, to the 27,000 range. As production rebounded starting in 2021, Boeing went on a hiring rampage, adding 3,500 machinists in 2023 alone. “We’re on this massive upswing, and it’s hard to get everyone up to speed,” says Holden. A Boeing spokesperson agrees, telling Fortune: “It’s a different world. We’ve lost a lot of institutional knowledge, and it’s especially acute in quality compliance. Getting this right will require much more training than in the past.” 

During a media tour of the 737 plant in Renton on June 25, Boeing’s VP for quality stated that a “moving crew” of mechanics closed the door plug that ripped off over Portland that was notoriously missing four bolts needed to secure it in place. But she stressed that it was simply their job to “ensure that any open holes on the plane are covered,” and that the workers weren’t responsible for reinstalling the “retaining pins” that had been removed. The failure, she said, arose because “The plug was opened without the correct paperwork.” She did not specify who was responsible for supplying that documentation. It’s clear that the controls and oversight governing the work were inadequate. No evidence exists that QAs were informed about the replacement or inspected the work. In a letter to Congress, Jennifer Homendy, chair of the National Transportation Safety Board, stated that she had called Calhoun, asking for the names of people who had done the job, and that the CEO was unable to “provide that information, and maintained that Boeing had no record of that work being performed.”

Meanwhile, the FAA has demanded that Boeing submit a comprehensive new plan to revamp its quality and safety procedures so damaged by the exodus of seasoned personnel. On May 31, the planemaker submitted its blueprint to the agency. The 11-page “executive summary” outlines such reforms as adding new inspections at crucial points in the production process, and extensive increases in time and spending devoted to employee training. High on the agenda: improving its internal reporting system for employees to ensure they can report quality gaffes from the factory floor anonymously, and without fear of retaliation.

Boeing is also moving to assert much stronger control over its manufacturing chain, after decades of extensive outsourcing. It’s announced plans to purchase Spirit AeroSystems, manufacturer of its 737 fuselages that have been arriving in Renton requiring major repairs, and has already dispatched many of its own inspectors to Spirit’s plant in Wichita. The safety plan includes an initiative to end “traveled,” or out-of-sequence, work where machinists don’t perform jobs at their regular station and rush to install parts or systems further down the assembly line. Top management seldom mentioned the problem of traveled work in the past in earnings calls or presentations before the Jan. 5 disaster. Suddenly, it’s a big deal. Likewise, the program submitted to the FAA pledges to strengthen the systems for managing aircraft parts.

One outcome that’s tough to predict: whether Boeing agrees to build the Max’s successor in Puget Sound—once again, a pledge it’s never given before on an all-new plane. The argument for dedicating its future to this region rich in seasoned personnel and aerospace culture—just consider how Boeing lures generation after generation of the same families—is a persuasive one. The giant upheaval from COVID that forced so many Americans to change locales and industries makes the strong concentration of airplane-production skills still found in Puget Sound more valuable than ever. That decision may signify that Boeing is rededicating itself to the culture that bred veterans like Freddie the Fastener.

At the Cactus Moon Saloon, Freddie—between peeling 50-cent pull tabs and getting enough matches to win a free Bud Light—is waxing nostalgic. “In the old days, it was such a great place to work. It seemed like everyone had been there for 10 or 20 or 30 years, and had a wife or kids at Boeing,” he recalled. As for the inspectors? “They were officious, but they were necessary. I didn’t want to hear about the wings I was fastening coming loose on the planes!” For Freddie, job one for Boeing is restoring that culture of loyalty and longevity. In recent years, the workers mainly got it right, and the C-suite mostly got it wrong. This historic contract, coupled with Boeing’s choice of a new CEO, will help determine if the legendary name gets its wings level by restoring the practices that made it great, or continues the most shocking and sudden descent in modern corporate history.