Pressure Builds for Boeing and Machinists to Settle

Pressures are building for Boeing (BA) and the International Association of Machinists & Aerospace Workers (IAM) to end a 45-day-old work stoppage. The aerospace giant is expected to release its weakest quarterly earnings report in years on Oct. 22, and there are hints that Washington is getting nervous about the economic impact of the machinists' strike. Expectations are rising that the workers may be coaxed back to factories by early November, though it remains unclear which side will blink.

The parties are scheduled to reconvene on Thursday, Oct. 23, this time in Washington under the guidance of top mediators for the U.S. Mediation & Conciliation Service (USMCS). Underscoring the urgency of the talks, USMCS Director Arthur R. Rosenfeld called the strike by some 27,000 machinists "a priority matter for this agency."

Indeed, the White House Council of Economic Advisers estimates that the Boeing strike alone knocked a half-percentage point from total U.S. industrial production in September. That contributed to an overall 2.8% drop in U.S. industrial production, the biggest decline since 1974, the advisers said on Oct. 16. The White House group, which drew special attention to the strike in its notes, had expected an overall decline of less than a percentage point. The economic advisers ranked the strike impact right up there with disruptions from Hurricanes Gustav and Ike, which together reduced production by some 2.25%.

Compromise on Outsourcing?

The mediators can urge reconciliation between IAM and Boeing, and exert subtle pressure through such gestures as bringing the parties to the nation's capital. But they can't compel the sides to come together. Instead, analysts say they believe the resumption of talks, after weekend sessions that ended in an impasse on Oct. 13, suggests some new flexibility by one or both sides.

"I would say that the union is probably giving up on some aspects of its outsourcing concerns," says Paul H. Nisbet, an analyst at JSA Research, a Malta (N.Y.)-based independent research firm that closely follows aerospace and defense companies.

Indeed, the union contends it has been willing to compromise, particularly around the sensitive issue of outsourcing. In the recent talks, for instance, the IAM suggested it would let suppliers enter factories and deliver parts to receiving areas near assembly lines, where the parts would then be transported further by IAM members. The arrangement could protect some 2,000 jobs, the union says.

But the company argues it needs more flexibility than that, including the ability to cut jobs if needed. "They want to put a bubble around these 2,000 jobs," says Boeing spokesman Tim Healy. "There's no way, especially in this economy, we can agree to preserve the jobs in perpetuity."

Boeing Chief Executive James McNerney Jr. has said the ability to outsource is crucial, especially when it can help Boeing sell planes to countries that want work in exchange for their orders. But organized labor officials want the union to stand firm to resist outsourcing, both domestically and abroad. They contend the IAM should be able, at least, to bid on work that the company wants to outsource.

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