Boeing's "Dreamliner" project turns into a nightmare.
In perhaps one of the Obama administration's most transparent efforts to burnish its pro-union credentials for the 2012 election, the National Labor Relations Board (NLRB) is suing the Boeing Corporation, claiming its effort to move some of its 787 Dreamliner production from Everett, Washington to its $750 million aircraft plant in North Charleston, South Carolina represents "unfair labor practices." South Carolina is a "right-to-work" state, whereas Washington remains a union stronghold of the International Association of Machinists and Aerospace Workers (IAMAW). The NLRB claims Boeing's move is "retaliation" for a series of IAMAW strikes between 1989 and 2008. Boeing says it will "vigorously contest" the lawsuit, and a June 14th hearing in Seattle has been scheduled.
"A worker's right to strike is a fundamental right guaranteed by the National Labor Relations Act," said NLRB acting general counsel Lafe Solomon in a statement released Wednesday. "We also recognize the rights of employers to make business decisions based on their economic interests, but they must do so within the law." J. Michael Luttig, Boeing's general counsel disagreed: "This claim is legally frivolous and represents a radical departure from both NLRB and Supreme Court precedent," he countered.
The NLRB acted on a complaint filed by the IAMAW in March 2010. An investigation ensued, and the NLRB found "reasonable cause" that Boeing had violated two sections of the National Labor Relations Act by picking Charleston Airport as the site of its second Dreamliner assembly plant, instead of expanding its existing facilities in Everett. According to the suit, Boeing did so "to retaliate for past strikes and chill future strike activity," adding that company officials had made "coercive statements" to unionized employees regarding their intention to move production out of the area. The Board cited internal documents demonstrating those intentions, and as well as several news interviews, specifically one by Jim Albaugh, CEO of Boeing Commercial Airplanes, who told the Seattle Times that while Washington State is his "preferred location" for building future airplanes, the Puget Sound region will only remain favorable if the union "moderates its future wage demands and avoids strikes." When asked about Boeing's reasons for picking the South Carolina location for its second assembly line, Mr. Albaugh was blunt: "The overriding factor was not the business climate. And it was not the wages we are paying today," he said. "It was that we can't afford to have a work stoppage every three years. And we can't afford to continue the rate of escalation of wages."
Unaffordable is an understatement. The last strike occurred in 2008 and lasted for a total of 58 days, reportedly costing Boeing more than $1.8 billion in lost revenue. In an effort to deal with the outrageous burden, Boeing sought to raise worker health care costs, take away their defined benefit pension plan, and outsource more work. This was the fourth IAM strike since 1989, and Boeing began to believe that orders for the 787 Dreamliner were being endangered by a union willing to strike every three or four years.
As a result, in 2009, Boeing bought the former Vought aerospace manufacturing plant in North Charleston, South Carolina. Before Boeing announced its North Charleston plant, it attempted one more round of negotiation with the IAM, during which the union offered the company an "unprecedented 11-year agreement" to maintain the labor "stability" the company had requested. Yet union demands in return were far too extensive, as revealed in a statement released by the company after talks broke down:
Boeing had hoped to secure a long-term agreement with a no-strike clause that would ensure production stability for its customers and be cost competitive for the future. In exchange, however, the IAM insisted upon terms unacceptable to Boeing, including a guarantee that Boeing would place all future commercial airplane production in Puget Sound, and a promise from the company to remain neutral in all IAM union organizing campaigns nationwide. When an agreement with IAM leaders could not be reached, Boeing opted to build the new facility in North Charleston.
Not mentioned in this release is the fact that the union had also demanded a seat on Boeing’s board.
Boeing then signed an agreement with South Carolina, which included $900 million in incentives and tax relief to sweeten the deal. IAMAW Vice President Rich Michalski was critical of the deal. “Boeing’s current management needs to rethink its strategy of repeatedly alienating its most valuable asset: the highly-skilled workers who build Boeing aircraft,” he said. “We will not allow our members to be made scapegoats for any purpose.”
Yet shortly after the North Charleston purchase, workers at that plant voted to decertify the IAM as their representative. “We are pleased that hourly workers elected to deal directly with the company on employment matters,” Boeing spokeswoman Candy Eslinger said. “We are also pleased that Boeing Charleston can move forward and meet commitments on the 787 program.” As a result of the vote, IAM filed a lawsuit against South Carolina Governor Nikki Haley for taking sides against them, claiming she was "violating US labor laws and the Constitution" by siding with Boeing. “Gov Haley placed her hand on a bible and swore to defend the Constitution of the United States,” said IAM Southern Territory Vice-President Bob Martinez. “[B]ut her stated intention is to actively oppose workers in South Carolina who wish to exercise their legal right to join a union.” Mr. Martinez apparently failed to note that the workers at North Charleston did "exercise their legal right" -- i.e. not to join a union as represented by a lopsided 199-68 margin in the vote for decertification.
Boeing also contends that it has the right both under federal law and its current collective bargaining agreement with the IAMAW to build additional plants in other areas. (Ordinarily the decision where to locate a work unit would be an integral part of the negotiations, but the IAM waived its right to bargain on the issue.) The company also pointed out that "none of the production jobs created in South Carolina has come at the expense of jobs in Puget Sound, and that not a single union member has been adversely affected." Furthermore, Boeing noted that "IAM[AW] employment in Puget Sound has increased by approximately 2,000 workers [emphasis added] since the decision to expand in South Carolina was made in October 2009." Given this reality, the NLRB's charge of "retaliation" by Boeing against the IAMAW is rather remarkable. More importantly, three Supreme Court rulings, Darlington Mills, American Ship Building and NLRB vs Brown undermine various parts of the NLRB's reasoning.
Yet the NLRB remained undeterred. Its complaint cited the aforementioned interview by Albaugh, and internal communications among company officials and managers -- all of which the NLRB characterized as "interfering with, restraining, and coercing employees in the exercise of their rights guaranteed [by the National Labor Relations Act]" -- as the proverbial smoking guns leading to the operations transfer.
The timing of the suit, Boeing contends, is also questionable. The NLRB waited for nearly a year and half to file, even as Boeing's decision to expand in South Carolina was announced in October 2009. Currently, construction on the North Charleston plant is nearly complete, costing Boeing millions, and the company has hired 1,000 workers to begin assembly of up three jets per month at the new facility by 2013, with construction on the first plane scheduled to begin this July.
The reasoning behind NLRB's delay is not difficult to understand: Prior to March 2010, the board consisted of only two members, one Democrat and one Republican, who were forced to set aside hundred of cases because they were unable come to agreements. The president put two Democrats, Craig Becker and Mark Pearce, on the board via recess appointments, giving Democrats a 3-1 majority, which they currently maintain. Thus, the board has adopted a far more union-friendly approach, which might explain why it took thirteen months to file suit, even as it was clear Boeing was spending time and money preparing its South Carolina facility.
Both Republican senators from South Carolina are furious. "This is nothing more than a political favor for the unions who are supporting President Obama's re-election campaign," said Senator Jim DeMint. "Unfortunately, it comes at the expense of hundreds of jobs in South Carolina and thousands of jobs nationwide. There is no doubt that if the National Labor Relations Board's claim against Boeing moves forward, it will have a chilling effect on job growth in my state and in right-to-work states across the country. Using the federal government as a political weapon to protect union bosses at the expense of American jobs cannot be tolerated. I intend to use every tool at my disposal as a United States Senator to stop the President from carrying out this malicious act."
Senator Lindsey Graham echoed that sentiment: "This is one of the worst examples of unelected bureaucrats doing the bidding of special interest groups that I've ever seen," Graham said in a statement. "In this case, the NLRB is doing the bidding of the unions at great cost to South Carolina and our nation's economy."
Governor Nikki Haley was also incensed: “This is an absolute assault on a great corporate citizen and on South Carolina’s right-to-work status. We will continue to do everything we can to protect that status, and to stand with companies like Boeing who understand what it means to take care of their employees without the interference of a meddlesome, self-serving union. This bullying will not be tolerated in South Carolina," she warned.
The NLRB's fallback position is that its lawsuit is limited to the production of the 787 Dreamliner, and that Boeing will be permitted to manufacture any other type of plane at the North Charleston site. “We’re not telling them what to do with it,” said Nancy Cleeland, a spokeswoman with the labor board.
Ms. Cleeland is technically correct. The NLRB is telling Boeing what they can't do in North Charleston. More to the point, like government-granted waivers for ObamaCare, it would appear this administration, via its appointees on the Labor Board, is once again attempting to pick "winners," aka unionized workers in Washington State, and "losers," aka non-unionized workers in South Carolina. Thus, the June 14th hearing in Seattle promises to be a very contentious fight between management and labor -- as well as highlighting the seemingly unprecedented scope of the federal government's power to dictate terms between the two. It was a point driven home by Hot Air's Ed Morrisey:
I’ve heard plenty of people dismiss Atlas Shrugged (the book as well as the movie) as overwrought, contrived paranoia about the regulatory state...[N]o one is marching into manufacturers in the US and telling the Hank Reardons of the world what they can build and where.
At least not until June 14th.
Arnold Ahlert is a contributing columnist to the conservative website JewishWorldReview.com.