Boeing’s Secret Weapon in Tanker Competition? Organized Labor

For all the coverage of Boeing’s surprise win in the lucrative Air Force refueling tanker contract, there’s one angle that hasn’t gotten nearly the media attention it deserves: Boeing’s unionized workforce actually gave it a competitive advantage over EADS and its plan to assemble tankers in a non-unionized plant in supposedly low-cost, “right to work” Alabama.

In fact, it wasn’t even close, with Boeing underbidding EADS by $3.6 billion, or more than 10 percent of the projected $35 billion contract price. And while EADS executives scoffed at their rival’s ability to eke out a profit on such “an extremely lowball offer,” Boeing executives and union leaders were all beer and skittles over their win, explaining that the secret to their success was how they worked together to increase efficiencies and cut costs.

“We worked really hard on what we thought ‘the price to win’ was,” said [Boeing Commercial Airplanes Chief Executive Jim] Albaugh. “We established ‘the price to win’ and then we went off and attacked the cost basis of this airplane.”

Tom Wroblewski, president of the Machinists union District 751, said Friday that Boeing’s production workers and engineers worked closely with management to establish the new, more-efficient 767 production line at the rear of the Everett factory to enable the lower bid.

How much more efficient? According to Connie Kelliher at IAM 751, as much as 25 percent—efficiency savings that simply couldn’t be achieved without Everett’s experienced and highly skilled union workforce. Just as impressive, Boeing and its workers managed to move the whole line without interrupting current 767 production.

And if you think that’s just the Machinists union patting itself on the back, well, think again:

Boeing Chairman, President and Chief Executive Officer Jim McNerney personally congratulated International Association of Machinists and Aerospace Workers District 751 President Tom Wroblewski Friday, saying: “The IAM was a big deal in this thing, a big deal. And we’ve got to keep coming together like this.”

Wroblewski, in turn, thanked McNerney and other executives for “the incredible partnership between the Machinists Union and Boeing.

“We have worked hand in hand on this issue on the political front, on the shop floor, and together we made it happen,” he said. “It demonstrates what we can do when we decide to work together.”

Huh. That sure does run counter to popular narrative, doesn’t it? Unions working together with management to make production more efficient and less costly? Indeed, it turns out that its lack of a comparable factory floor partner in Alabama actually put EADS at a competitive disadvantage.

It is important to note that all of these production efficiencies—efficiencies that helped win a contract that will save or create 11,000 jobs in Washington state while pumping $693 million a year into the local economy—they were all achieved without any contract concessions on the part of Boeing’s unions. But then, as IAM’s Kelliher points out, with wages and benefits making up less than 5 percent of Boeing’s production costs, wages and benefits represent one of the smaller opportunities for aerospace manufacturers to shave costs. So much for the meme that high labor costs are the achilles heel of American manufacturing.

“$10 to $11 an hour…” Kelliher said, referring to the potentially low starting wages EADS might have paid in Alabama, “You need more skill than that at 30,000 feet.”

In fact, as Boeing’s tanker win proves, you need more skill than that on the factory floor, just to get the plane off the ground. Something to think about as the Republicans continue their anti-union jihad in Wisconsin and across the nation.