Everett, Wash.
Published: Thursday, October 11, 2007

Contract negotiations come amidst 787 delay

By Michelle Dunlop
Herald Writer

 EVERETT -- In between flying its Dreamliner in the spring and delivering the first 787 next winter, the Boeing Co. will need to negotiate new contracts with the engineers and Machinists responsible for bringing the plane to life.

Industry observers aren't sure whether the six-month delay Boeing announced Wednesday to its Dreamliner program benefits the bargaining power of the labor groups, which represent 45,000 Boeing employees in the Puget Sound region. Both the local district of the International Association of Machinists and the Society of Professional Engineering Employees in Aerospace will begin talks on three-year contracts with Boeing next year.

On Wednesday, Boeing announced a six-month delay to its Dreamliner program, pushing back its first delivery from May to December 2008 at the latest. Had the company hit its initial target, Boeing would have the 787's first flight and delivery out of its hair before heading to the negotiating tables with the unions.

Despite problems with the 787, the company doesn't foresee a rampant increase in hiring production workers in Everett, said Yvonne Leach, spokeswoman for the Dreamliner program.

One of the major problems Boeing faces with its Dreamliner stems from 'traveled work' or incomplete parts arriving from the company's global suppliers.

"We think the issues we're seeing are tied to rework in the first airplane," said Scott Carson, Boeing's head of Commercial Airplanes, during a conference call Wednesday.

Leeham Co. analyst Scott Hamilton suggested the issues with the suppliers' work puts Boeing's Machinists in the position to say, "I told you so."

The Machinists were infuriated when Boeing sourced out to suppliers in Japan, Italy, South Carolina and Kansas the building of major 787 components such as the plane's wings and fuselage. Those pieces are flown to Everett where workers piece them together. Production workers here are having a tougher time sorting out that traveled work than anticipated.

Hamilton, however, doesn't think that Boeing is likely to move back manufacturing of major 787 pieces based on initial problems. In fact, Carson called the challenges "normal" and emphasized his confidence in the supply chain.

Boeing could be forced to pay penalties to the 15 customers who will receive their Dreamliners late. This could put Boeing in a penny-pinching mood about labor contracts, Hamilton said.

On the other hand, Boeing will need all hands on deck to meet not only its revised schedule but its commitments for other new aircraft, such as its 747-8 and its 777 Freighter.

Paul Nisbet, an analyst with JSA Research in Rhode Island, didn't see the Dreamliner delay as a negative for the unions.

"They're always in a pretty good position whenever Boeing's doing well," Nisbet said.
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