What Happens When Boeing Threatens to Jet

Boeing won’t be taking off from Washington state after all.

The giant jet maker has cut a deal with its largest union, the International Association of Machinists and Aerospace Workers, to stay put and have the 777X jetliner and its wings assembled in Washington. In exchange, union members have agreed to the end of a defined-benefit pension plan and a moratorium on strikes until 2024.

The vote was extremely tight, passing by a margin of only 600 votes out of about 23,900 counted. But in the end, Boeing was able to exercise considerable leverage, not least since a reported 22 other states had offered to take Washington’s place and build the 777X.

“This was a turning point in the labor movement,” Wilson Ferguson, president of a local unit of District 751, told the Associated Press. “Pensions were hard-fought battles to get in the first place. Once they’re gone, they’re gone.”

Peter Drucker, who in addition to being a corporate consultant also advised a number of American labor leaders, would certainly have sympathized with the many local union members opposed to the contract. As we’ve written, he had great concerns about the steadily eroding economic fortunes of factory workers.

Nevertheless, he likely would have concluded that the Boeing agreement is more positive than negative.

Drucker was at best ambivalent about the use of the strike, which, in The New Society, he went so far as to call a “violent break with the established order,” making compromise harder and brinksmanship all the more intense. A 10-year break from even a threat of the tactic would have probably been advisable in his view.

As for transitioning from pension plans with defined benefits (guaranteeing a sum to be paid out) to defined contributions (guaranteeing only a sum to be paid in), Drucker would have felt this was about 60 years overdue—as painful as it is for the individual workers affected. As we’ve noted, Drucker warned throughout his career against defined benefits and the financial burdens they placed on corporations.

Ironically, in 1950, it was workers who wanted defined contributions and management that pushed for defined benefits. But this was a Pyrrhic victory for business.

“The choice of defined benefits—as we now realize, a major blunder—was based on the same delusion that makes people in Las Vegas believe that they will ‘make a fortune’ if only they keep on feeding more quarters into the slot machine,” Drucker wrote in The Frontiers of Management

What do you think of the Boeing deal?