Thursday, August 28, 2008

Round 2: Boeing - Machinist Fight

In a stare-down contest with its Machinist union, The Boeing Co (BA-$66.79) blinked first. The aerospace giant yielded to demands from the International Association of Machinists, which represents about 19 percent of its workers, and withdrew a proposal to switch new hires from penion-based retirement plans (with related healthcare coverage) to one based on a 401 (k) plan.

Boeing removing the pension chip from the table was never taken as a serious threat by the union, for the actual return on the $50.4 billion in plan assets has exceeded benefits paid to retirees two years running,
according to the 2007 10-K filing. For example, in fiscal 2007 plan assets (as of September 30) increased by $6.02 billion and benefits paid (including related healthcare charges) totaled only $2.39 billion.

Boeing only shelled out $580 million in actual cash in 2007.

Distance between the two sides still remains on how to cut healthcare payments to future retirees. Retired workers already absorbed $135 million in scaled-back coverage in the last two-years. Boeing is still proposing to eliminate early retiree medical benefits for new machinists. The union threatens to call a strike vote if management does not remove this demand by September 4. Although, the status of other post-retirement benefits remains under-funded by $7.57 billion, the company can easily draw from assets in over-funded plans to meet retiree healthcare bills in coming years.

What the two sides can readily agree on, however, is that unless the potential strike is settled soon, the scheduled first flight of the troubled
commercial Dreamliner 787 could be delayed beyond the fourth-quarter of this year.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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