Boeing Winnows States’ 777X Bids With Union Unmoved on Cuts

Dec 17, 2013 4:36 pm ET

(Updates with closing share price in final paragraph.)

Dec. 17 (Bloomberg) -- Boeing Co. has begun narrowing the list of potential state finalists to manufacture its new 777X aircraft after Machinists union leaders rejected new contract terms last week.

Boeing hasn’t withdrawn its proposal to its largest union to keep production of the aircraft in its Seattle commercial hub, as District 751 leaders contend, Ray Conner, president and chief executive officer of Boeing’s commercial airplane unit, said today in a message to employees.

“It was a rejection plain and simple, and we now have to turn and face the reality of the union leadership’s final decision,” Conner said.

Washington Governor Jay Inslee and officials at the Machinists’ headquarters have urged union leaders to allow workers to vote on the latest proposal, which would still end worker pensions, a central provision in an earlier offer that was rejected last month by 67 percent of members.

“I think you’ll agree with us that Boeing’s demands for concessions on retirement and health benefits -- plus limits on future wages -- were unreasonable, especially considering how we have delivered record numbers of airplanes and record profit margins this year,” Tom Wroblewski, president of District 751, said in a message to the union’s 31,000 Seattle-area members. “And, if you compare the two latest offers, you’ll see that the only real difference between November’s offer and the more- recent one is that Boeing proposed to take away just a fraction less.”

Bryan Corliss, a spokesman for the Machinists union, couldn’t immediately be reached for comment on Conner’s letter.

Short List

After receiving proposals from 22 states by a Dec. 10 deadline, Boeing is drafting a final list of sites to assemble its largest twin-engine aircraft, build carbon-fiber composite wings and make other components. The Chicago-based company expects to make a final decision early next year on where it will build the 777X, Conner said.

That leaves Boeing three years to develop facilities and assemble a workforce needed to meet its goal of beginning production of the new jet by 2017. The planemaker has promised customers such as Emirates Airline that the new plane will begin commercial service in 2020.

Boeing rose 0.9 percent to $135.88 at the close in New York. The shares have gained 80 percent this year, the most of any company in the Dow Jones Industrial Average. The planemaker said yesterday that directors voted to raise its quarterly dividend by 51 percent to 73 cents a share and authorized a $10 billion share-repurchase plan.

--Editors: Stephen West, John Lear