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Dear Boeing: Next Time, Try Benevolence

02/05/2014 01:33 pm ET | Updated Apr 07, 2014

There is joy in Mudville -- for now. After a cliff-hanger of a union vote, Boeing will stay here in Washington state, where it was founded almost 100 years ago and where it's since become the world's biggest airplane manufacturer and the state's biggest employer.

But the joy is not universal and it's not deep, and who knows how long it will last? Lingering in the craw are Boeing's hardball, take-it-or-we-leave-the-state tactics.

For starters, acting on an explicit threat to move more production to another state -- in a historic break, Boeing in 2009 moved a major assembly line to South Carolina, a non-union "right-to-work" state -- Boeing extracted from our Legislature a corporate tax credit package of nearly $9 billion -- the largest such package not only in state history but in all U.S. history -- in a special session called in November by Governor Jay Inslee.

"Extracted" is the correct term: Legislators were so fearful of losing the state's biggest employer that, usually as polarized as most other state legislatures, they passed in just three days a bill acceding to Boeing's demands (see bill here); final vote in the Senate was 44-2 and in the House, 75-11. (Disclosure: My husband is a member of the House, a Democrat, and voted Yes on the package.) The Governor was unusually visible throughout, clearly not wanting his epitaph to read, "He lost Boeing." Members could only wish their constituencies could command such favor.

Days later, the machinists union, representing the workers who assemble the planes, was called to vote on a contract notable for its stinginess. In it, Boeing proposed the abolition for future workers of its long-time pension system -- the bitterest pill to swallow -- to be replaced by a 401(k) system; workers would contribute more for their healthcare plan; and to "zoom" to the highest salary levels would take sixteen and not the standard six years. When first presented with the contract, the union president called it "a piece of crap"; members were vociferous in their disdain of Boeing's ultimatum. The eventual vote on Boeing's first offer, on Nov. 13, was a resounding No -- 67 percent against. (See also here.)

Boeing immediately retaliated by opening up the bidding to other states, with a remarkably demanding list of demands. In addition to providing the factory and attendant infrastructure (airport runway, railroad spur, highway access; port optional), total outlay for which was $10 billion, competing states were "asked to shrink that tab by providing the site and facilities at 'no cost, or very low cost,'" according to The Seattle Times, our lead newspaper. More cuttingly, The Washington Post described Boeing's "desirable incentives" as "government handouts":

"And this is subtle: Boeing says it wants the '[e]ntire applicable tax structure including corporate income tax, franchise tax, property tax, sales/use tax, business license/gross receipts tax and excise taxes to be significantly reduced.'"

As additional "incentive," Boeing requested of competing states "assistance in recruiting, evaluating and training employees" --in other words, creating a work force like the expert one already in place here, not to forget the billions in infrastructure also already in place and in use. This is good business management?

Despite Boeing's tall order, nearly two dozen states were soon knocking themselves out with their own billion-dollar tax credit packages to land Boeing for their workforce. Meanwhile, back here in Washington state, Governor Inslee began wooing Airbus, Boeing's major competitor, to shore up Boeing's supply chain of some 1,250 companies who'd be damaged or founder if Boeing went elsewhere.

It all made for a tense Thanksgiving and Christmas season, as the reality sank in that Boeing really, really might leave the state. The thought that Boeing could never find the same expertise elsewhere was soon cancelled by recalling it had bolted the state already. Contemplating the second and possibly final union vote coming up, the mayor of Everett, a major Boeing assembly site, said his city would "thrive or dive," depending on the result. Meanwhile, digging in their heels, the machinists held "Hell, no" rallies (also here). Things looked bad for Mudville, even tragic.

How central has Boeing been to the state's identity? It's hard to quantify a mythic presence. Growing up here, we were always aware of the two corporate giants, Boeing and the timber company Weyerhaeuser, looming over the landscape like Mt. Rainier. Even with the emergence of newer giants like Starbuck's, Microsoft, and Amazon, Boeing still was premier. Boeing workers -- now into the fifth generation -- took pride in their product, as we all did indirectly: manufacturing a mechanical behemoth which, astonishingly, can fly. In a show of pride from the grave, obituaries of Boeing employees typically include the model number of the planes on which the deceased worked.

But in the last twenty years that attachment has taken blows, most administered by Boeing, one being when it moved its corporate headquarters from Seattle to Chicago in 2001. The merger with McDonnell Douglas in 1997 brought a new emphasis -- on cost-cutting rather than quality -- which meant "corporate hell" for the workers, who suffered through "mass layoffs, outsourcing of their jobs, relentless cost-cutting and a dizzying pace of change." Heartlessly, the incoming CEO told workers to get over it, to "quit behaving like a family and become more like a team." As related in the 2010 book, Turbulence: Boeing and the State of American Workers and Management, workers were forced to acknowledge, "It's not your father's Boeing anymore."

And yet, Boeing workers kept producing, while the same cannot be said of Boeing management: This is the "talent" that so radically fractured, via outsourcing, the design and assembly process of the Boeing 787 Dreamliner that alignment problems soon emerged and a key battery overheated in finished planes, in three widely-reported cases (also here and here).

Still, even with deteriorating employer-employee relations, it's another thing entirely for the corporate giant to leave the state. We saw how, when the auto industry declined in the late 20th century, Detroit declined too and recently filed for bankruptcy. Can't happen here, please.

Prior to the final union vote, public officials and editorialists bent over backward not to use the g-word -- greed -- to describe Boeing's actions, so as not to offend (also here, here, here, here, and here). But one has to ask: In light of recent banner years of profit and the prospect of more with a $400 billion backlog in orders -- each big contract headlined by local media -- what else but greed explains why Boeing cannot be more generous and more humane with its workers? Refreshingly, the machinists didn't abide by such politesse and were harshly critical of their employer, not hesitating to cite their CEO's salary of $21 million. Said one machinist, reflecting the general opinion:

"It's disgusting. We're willing to negotiate and sacrifice a bit. Meet us halfway and everybody will walk away with heads held high. Instead they are threatening us."

For this outspokenness, and for a frankly botched job of union leadership to clarify that Boeing was not out to "destroy" current pensions, just not offering them in future, the union was treated in the media rather more roughly than Boeing (see above editorials), with reference made to "union firebrands." This, despite the fact it was Boeing that was taking and the union that was giving. Such was the tension and the onus on the union when, on January 3, the second vote was taken.

Happily, the union gave again, and saved the state: By the slimmest of margins -- 51 percent -- members voted to accept Boeing's contract. Turning "Hell, no" to Yes, many said they did it for their children, the sixth generation of Boeing workers. The joy in Mudville was resounding, as were the sighs of relief. Boeing stays! (Boeing let stand when workers can "zoom" to the highest pay levels, at six rather than sixteen years.)

Yet since the final vote, repercussions are coming to light that put a new lens on the power imbalance between Boeing and everyone else (also here and here).

Following Boeing's anti-union lead, Republicans are now calling for the end of the pensions for state employees, arguing that if pensions for employees of a company that is flush can be dispensed with, how can the pensions of those who work for a budget-constrained state be justified? And now, with the Legislature back in regular session, Boeing is working with Senate Republicans to limit workers' compensation for repetitive-motion injuries and other occupational hazards.

Additionally, some of the companies in Boeing's supply chain in-state now want the same tax breaks that Boeing received in its historic package. The Governor now decries those "subsidies" that states are obliged to fork over to host corporate giants like Boeing. (One governor said that, after scrambling to assemble such subsidies package, he "felt used" by Boeing -- and he was.) Forking over these subsidies means there's that much less revenue coming from the corporate sector to fund those vital things the state provides -- infrastructure, social services, education (which our state constitution establishes as the state's "paramount duty" to fund). It's the taxpayer who foots that bill, while Boeing enjoys its profits. Legislators are hearing from constituents, angry that Boeing is not a "better neighbor."

About that historic subsidy, which was an extension of an earlier $3.2 billion package in 2003: This time our Legislature inserted a proviso that, should Boeing accept the package, it was legally obligated to keep production in-state (see p. 2, line 27 of bill). In the earlier package, there was no such proviso, so, as the bill was silent on the matter, Boeing was legally free to bolt the state, which it did, to South Carolina -- while still enjoying our state's tax breaks. Our grandparents would call that maneuver an example of "sharp practices."

Meanwhile, another repercussion: While machinists took the bullet for the state and voted to keep Boeing here, many are angry at the Governor, the Legislature, and other public officials who they feel "shafted" them on pensions while hanging on to their own. And the local is angry at the national union for forcing the vote. It should be remembered, though, it was Boeing's hardball tactics that started this rancor. (See aerospace analyst's blog with video and comments here.)

This all is not to say that machinists are poorly paid at Boeing: Pay ranges from $60,000 to more than $100,000. Nor is Boeing the first company to discontinue a company-funded pension plan; the shift to 401(k) plans managed by the employee occurred years ago. Analysts calculate that, properly managed, 401(k) plans can yield nearly as much as pensions, though of course everything depends on managing such plan in markets where risk is high and trust is absent.

But what galls workers most is being held hostage by their employer, treated with a high hand, shown little regard. Surveying worker comments over the last twenty years makes this discontent abundantly clear (here, here, and here). Given the anxiety of layoffs and the sundering of proprietorship with outsourcing, working for Boeing is now just a job, not the point of pride it once was. Boeing, in its communications about the machinists contract, shifted from corporate-speak to first person plural only after the union voted to approve the stripped-down version, referring finally to "our" employees and "amazing team." It rings false.

All of which runs counter to a new strain in business management thinking that emphasizes the need for management to treat employees as "stakeholders" rather than merely "costs" and shows the increased productivity and general satisfaction flowing therefrom (also here and here). One would have thought the benefits of humane management would be self-evident---Benevolence pays: who knew?---but in this era of turbo-capitalism, the over-supply of callous management accounts for the rising demand for such sane advice.

Power: It's all about power---the acquisition of it and the handling of it. Boeing is now a major corporate powerhouse, which power it acquired through generations of dedicated employees in this state. Now comes the test: How will Boeing handle its power? It's a test Boeing management must address---and address as an exercise in ethics. Because at the moment there is no equity at all in the power relationship between Boeing and its employees, or even between Boeing and the state. The power all lies with Boeing.

But Goliath and David doesn't begin to describe this power imbalance; it's more like Godzilla and Bambi. The question becomes: Will Godzilla do what comes naturally to Godzilla, which is to crush? Or can it grow a bigger brain and a benevolent heart?

Ever since the '08 financial crash, when bad management practices were broadly revealed, this writer has advocated for a George Washington visionary or savior to emerge from Wall Street or the corporate suites, one who's both business-savvy and benevolent (here, here, and here), but, sadly, there's been little sign of such leader.

The contract for Boeing's engineers is scheduled for negotiation in 2016. We wonder: Which Boeing will show up---Godzilla or George Washington?

For more on Boeing management, see here, here, and here. For a review of the book "Turbulence," see here. For Boeing's historical timeline, see here.

Carla Seaquist's forthcoming book of commentary is titled "Can America Save Itself from Decline?: Politics, Culture, Morality." Her earlier book, "Manufacturing Hope: Post-9/11 Notes on Politics, Culture, Torture, and the American Character," came out in 2009. Also a playwright, she published "Two Plays of Life and Death," which includes "Who Cares?: The Washington-Sarajevo Talks," and is at work on a play titled "Prodigal."

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