Never a fan of reading too much into a labor strike, after all each story looks pretty much the same. Two parties can’t see eye to eye on pay increases, firing policies, retiree pensions and health benefits as well as job security. It’s not that we don’t sympathize with Boeing and its 28,000 machinists, it’s that the story seemed to look like every other union-management dispute. But actually after you scratch the surface of this particular strike, a very interesting global sourcing story emerges with relevance to every single company buying and selling metals.
It appears as though the major area of dispute lies not in compensation but in outsourcing work to contractors. In sourcing speak, it’s the classic make vs. buy decision. According to this Wall Street Journal article, the union is seething from a 2002 agreement in which Boeing inserted a clause that was accepted by the union to “allow non-union contractors to deliver parts directly to the assembly line.” The union claims that despite their contributions to help streamline and create more efficient operations, Boeing “finds a way to send more jobs to outside contractors.” It’s the classic slippery slope argument – if we cede on this point, will Boeing allow contractors to also install components on the planes?
But the specifics of what the union is really seething about relates to a clause in which Boeing allows workers 180 days to make their case as to why something should not move to outside contractors. The hitch is that it does not apply to new programs (in which Boeing can make its own decisions). Now I’ve never put myself in the camp of Union Supporter but it seems to me that by allowing workers to bid on new programs (using Boeing’s Total Cost of Ownership Model ), would likely never result in a decision to make instead of buy, given what the union is already getting from Boeing. But if the union does turn out to yield the lowest Total Cost of Ownership, isn’t it in the interest of shareholders to keep that clause in the contract?