Governor Jay Inslee signs Boeing bill, flanked By Sen. Patty Murray, Boeing CEO Ray Conner (second from left) and other state officials. Credit: John Stang
On Wednesday night Boeing's Machinists union decisively rejected contract changes which would have guaranteed that the assembly of its planned 777X airliner happened in the Puget Sound region.
"This wasn't a contract. It was a corporate shakedown," said union member Neal Jacobson, after the vote results were announced.
Machinist Dan Kuehl said Boeing rubbed union members the wrong way by popping a brand new, non-negotiated, eight-year deal on the table when the union's current contract had almost three years left to go. "They just presented it to us and said here," said Kuehl. "We didn't think that was in good faith or honorable."
Tom Wroblewski, president of the International Association of Machinists and Aerospace Workers Local No. 751, did not speak to the press on Wednesday evening. Nor was the exact vote tally available. But rank-and file membere said the split was 67-33 percent against the proposed contract. Local 751 has roughly 30,000 members.
Boeing will now assess its options for 777X assembly and wing construction, and Gov. Jay Inslee vowed that Washington State would continue to compete aggressively to win the work. The governor told reporters that, beginning Thursday, Boeing would invite other company sites to bid on the work.
"We are very disappointed in the outcome of the union vote," said Boeing Commercial Airlines CEO Ray Conner in a press release. "… But without the terms of this contract extension, we're left with no choice but to open the process competitively and pursue all options for the 777X."
"It's a bluff," said veteran union member Kelly Burrus, about Boeing's response to the vote. "It's bullshit. We're just asking for the same (benefits and pension set-up). We're not asking for more. Don't touch my pension. Don't touch my benefits."
In a separate statement, the Washington State Labor Council sited the hurried nature of this contract process: "Rank-and-file members of the Machinists union voted down a complex Boeing proposal before them one week ago. … The vote is also a reflection of having to respond to the complex set of issues on one week's time — issues that will have a significant impact on the well-being of tens of thousands of family members and hundreds of thousands of community members."
Whatever Washington's chances in an open competition, it was clear that the state had lost an opportunity to secure thousands of jobs on the new plane for years, probably decades to come. Many union members and some industry analysts have maintained that Boeing has huge incentives to keep the work in Washington, because the existing 777 work is already based in the state.
The no vote follows a three-day special session in which the Washington Legislature handed Boeing the largest state tax break package in American history: $8.7 billion. Gov. Jay Inslee signed the bill into law on Monday.
Robert Mak gathered reaction at the Machinists union hall.
After the union vote, Inslee praised state lawmakers and spoke up for the tax incentives package, calling it one of the big assets the state will bring to the 777X competition. "This was the right thing, a bipartisan decision," he said. "I stand by it."
The governor did not comment directly on the Machinists' decision, but allowed that when union representatives gave him the results, "I expressed the fact that we could have won" without other parts of the country having a chance to compete. "This was an unparalleled opportunity for us," he said.
But Inslee maintained a determined, confident posture. "We have strong assets that we intend to bring to this competition," he said, including including the tax incentives and transportation packages being negotiated by legislators from both parties, and what he called the best aerospace workforce in the world. "We will continue to compete morning, evening and night to win this airplane."
The local business community appeared to be lining up in favor of a renewed push to keep the 777 here. Less than an hour after Inslee spoke, Maud Daudon, CEO of the Metropolitan Seattle Chamber of Commerce, issued a statement saying, “We’ve already made great progress on important tax and workforce issues necessary to retain 777X production and assembly here. Now we are going to have to compete even harder.”
Senators and representatives overwhelmingly approved extending Boeing tax breaks from their scheduled 2024 expiration date to 2040. Legislators believe the 777X, with its tens of thousands of jobs, is critical for the state's long-term economic health. But legislators — from both parties — also grumbled about the unexplained urgency for the bill to be passed in three days, which meant voting before they had an adequate chance to study it and to amend it.
Olympia has been burned by Boeing tax breaks before. Lawmakers approved $3.2 billion in tax breaks for Boeing in 2003 — the same eight exemptions that will be extended from 2024 to 2040 in the current bill — to keep Dreamliner construction in state. But that didn't prevent Boeing from building a second 787 plant in South Carolina and using that facility to play Washington against South Carolina, with the Evergreen state usually losing.
The new bill comes with a caveat. If Boeing moves any 777X work to another state, the biggest tax break — the one that trims the preferential business-and-occupation tax rate on the 777X's gross receipts in half — would disappear. That tax break alone is estimated to be worth $3.5 billion from 2024 to 2040.
At a University of Montana speech covered by KING-TV Tuesday, Boeing's top CEO Jim McNerney had said Boeing would consider another site if the Machinists rejected the contract. Inslee wasn't surprised to see Boeing is following through on its plan for an open competition. As determined as the governor seemed about winning, he made it clear that he would rather have won preemptively.