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Originally published October 7, 2008 at 12:00 AM | Page modified October 7, 2008 at 12:49 PM

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Positions harden in Boeing strike; McNerney, unions spar over outsourcing

Boeing has not talked directly with the International Association of Machinists (IAM) since the union's strike began more than four weeks ago. But in a memo to salaried employees still at work, McNerney said Boeing won't scramble to settle on the union's terms.

Seattle Times aerospace reporter

Both major unions at Boeing responded caustically to a sharp message from Chairman and Chief Executive Jim McNerney on Monday.

Boeing has not talked directly with the International Association of Machinists (IAM) since the union's strike began more than four weeks ago. But in a memo to salaried employees still at work, McNerney said Boeing won't scramble to settle on the union's terms.

"It would be gravely unwise for Boeing to agree to terms in any contract that would fundamentally restrict our ability to manage our business," McNerney wrote.

He said management cannot accede to the IAM demand that Boeing reduce outsourcing and provide job guarantees to the Machinists. He cited as justification the potential for major competitive threats emerging in China, Russia, Japan and elsewhere.

In response, IAM leaders said its demands on outsourcing are narrow, aimed not at curtailing the global scope of Boeing's production but at preserving ancillary jobs in local factories.

A leader of the engineering union also weighed in, arguing that Boeing outsourcing has helped create the emerging threats in Japan and Russia.

McNerney's memo said Boeing's European rival, Airbus, is growing stronger as it restructures and cuts costs while rivals are rising in China, Russia, Japan, Canada and Brazil.

And he raised two American specters to emphasize the dangers facing the Puget Sound region: the disaster that has befallen the Detroit auto industry and competition from cheap labor emerging in the Southern U.S.

McNerney said Detroit's Big Three "all but fatally wounded themselves years ago by promising unsustainable wage and benefit levels and by agreeing to contract conditions [including job guarantees] that limited their flexibility to run their businesses in the face of intense global competition."

Beachhead in South

He said the plan by Airbus parent EADS to build the Air Force refueling tanker in Mobile, Ala. — a contract stalled for now until the next president takes office — is a move "to establish a beachhead for producing commercial airplanes in the United States — and in a very low-cost location."

McNerney warned that the IAM's "track record of repeated union work stoppages" is "earning us a reputation as an unreliable supplier to our customers."

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"We want this strike to end," said McNerney. "But we cannot sacrifice our long-term competitiveness for expedience in a short-term agreement to end the walkout."

In response to the memo, Mark Blondin, IAM national aerospace coordinator, said in an interview that McNerney's message mischaracterizes the union's position on outsourcing.

Blondin said the union recognizes Boeing must send some work overseas as a condition of airplane sales but said the IAM seeks only to limit outsourcing of very local work: delivering parts within the factories and maintaining the facilities.

"We're not trying to take away their decisions when it comes to this global stuff they have been doing," said Blondin. "Our issue is right here in front of us. We are not going to allow suppliers to come in and do jobs that our members do inside those gates."

The white-collar engineering union, which is in negotiations with Boeing, also reacted to the memo, though its critique focused squarely on the global manufacturing model.

Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), said it is "bizarre" that McNerney argued for continued outsourcing while expressing concern about competitive threats abroad.

Shared technology

He pointed out that Boeing has shared critical technology, especially on the 787, with Japanese industrial giant Mitsubishi — the same company working on a jet that could rival Boeing's smallest jets.

And SPEEA has a list of 199 Russian contract engineers who this summer worked at Boeing's Puget Sound-area facilities before returning to the company's design center in Moscow.

"McNerney seems to want to have it both ways," said Goforth. "Outsource all these major components around the world and arm our competitors with the skill sets they need to compete."

McNerney's memo and the IAM response will reinforce a growing perception that both sides are digging in for what could be a prolonged and damaging stoppage.

Goldman Sachs analyst Richard Safran lowered his profit forecast for Boeing on Monday on the expectation of a long strike.

"Our new working assumption is that the strike lasts through November," Safran wrote in a note to clients published before McNerney's memo. "We also believe there is risk that the strike lasts into December."

Boeing shares closed down $2.54, or nearly 5 percent, at $51.29 Monday.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2008 The Seattle Times Company

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