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Vote to continue strike exposes Boeing workers' anger over lost pensions
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Boeing Strike
Boeing employee Gina Forbush wears an pin saying "IT'S A HARD NO!" while listening to the announcement that union members voted to reject a new contract offer from the company, Wednesday, Oct. 23, 2024, at Seattle Union Hall in Seattle. (AP Photo/Lindsey Wasson)
Since going on strike last month, Boeing factory workers have repeated one theme from their picket lines: They want their pensions back.
Boeing froze its traditional pension plan as part of concessions that union members narrowly voted to make a decade ago in exchange for keeping production of the company's airline planes in the Seattle area.
Like other large employers, the aerospace giant argued back then that ballooning pension payments threatened Boeing's long-term financial stability. But the decision nonetheless has come back to have fiscal repercussions for the company.
The International Association of Machinists and Aerospace Workers announced Wednesday night that 64% of its Boeing members voted to reject the company's latest contract offer, which included a 35% increase in wage rates over four years. Crucially, the company did not propose to restore pensions for the 33,000 machinists.
The extension of the six-week-old strike plunges Boeing — which is already deeply in debt and lost another $6.2 billion in the third quarter — into more financial danger. The walkout has shut down production of the company’s 737, 767 and 777 jetliners, cutting off a key source of cash that Boeing receives when new planes are delivered to airline customers.
The company indicated Thursday, however, that bringing pensions back remained a non-starter in future negotiations. Union members are just as adamant.
“I feel sorry for the young people,” Charles Fromong, a tool-repair technician who has spent 38 years at Boeing, said at a Seattke union hall after the vote. “I've spent my life here, and I'm getting ready to go, but they deserve a pension, and I deserve an increase.”
What are traditional pensions?
Pensions are plans in which retirees get a set amount of money each month for the rest of their lives. The payments are typically based on a worker's years of service and former salary.
Over the past several decades, however, traditional pensions have been replaced in most workplaces by retirement-savings accounts such as 401(k) plans. Rather than a guaranteed monthly income stream in retirement, workers invest money that they and the company contribute.
In theory, investments such as stocks and bonds will grow in value over the workers’ careers and give them enough savings for retirement. However, the value of the accounts can vary based on the performance of financial markets and each employee’s investment decisions.
Why did employers move away from pensions?
In the 1980s, about 4 in 10 U.S. workers in the private sector had pension plans, but today only 1 in 10 do, and they’re overwhelmingly concentrated in the financial sector, not manufacturing, according to Jake Rosenfeld, chairman of the sociology department at Washington University-St. Louis.
Companies realized that when they were on the hook to guarantee a certain percentage of the workers' salaries after their retirements, that’s far riskier and more difficult to manage than defined contribution plans, Rosenfeld said.
“Defined contribution plans shift the risk of retirement onto the worker and the retiree, away from the company,” he added. “And so that became the major trend among firm after firm after firm.”
Given the decades-long shift away, Rosenfeld say he was surprised the issue "has remained a sticking point on the side of the rank and file” at Boeing. “These are the types of plans that have been in decline for decades now. And so you simply do not hear about a company reinstating or implementing from scratch a defined contribution plan.”
What happened to Boeing's pension plan?
In early 2014, Boeing demanded that machinists drop their pension plan as part of an agreement to build a new model of the 777 jetliner in Washington state. Union leaders were terrified by the prospect that Boeing would build the plane elsewhere, with nonunion workers, as it did with 787 Dreamliners, which are assembled in South Carolina.
After a bitter campaign, the agreement with Boeing was approved by a bare 51% majority of machinists in January 2014. Boeing contributed 10% of employee wages into retirement accounts for two years, 6% in the third year, and 4% after that. It also matched employee contributions to a certain point.
Two months later, the company also froze pensions for 68,000 nonunion employees including managers. Boeing's top human-resources executive said at the time that the move was about Boeing “assuring our competitiveness by curbing the unsustainable growth of our long-term pension liability.”
How realistic is the Boeing workers' demand?
Over the past several weeks, Boeing has twice raised its offer on wage increases, but it has been steadfast in opposing the return of pensions.
“There is no scenario where the company reactivates a defined-benefit pension for this or any other population,” the company said in a statement Thursday. "They're prohibitively expensive, and that’s why virtually all private employers have transitioned away from them to defined-contribution plans.”
Boeing says 42% of its machinists have been at the company long enough to be covered by the pension plan, although their benefits have been frozen for many years. In the contract that was rejected Wednesday, the company proposed to raise monthly payouts for those covered workers from $95 to $105 per year of service.
The company said in a securities filing that its accrued pension-plan liability was $6.1 billion on Sept. 30.
Jon Holden, the president of IAM District 751, which represents the striking workers, said after the vote that if Boeing is unwilling to restore the pension plan, “we’ve got to get something that replaces it.”
Do companies ever restore pension plans?
It is unusual for a company to restore a pension plan once it was frozen, although a few have. IBM replaced its 401(k) match with a contribution to a defined-benefits plan earlier this year.
Pension plans have become a rarity in corporate America, so the move may help IBM attract talent, experts say. But the reason IBM chose to restore its pension plan may be more financial. After freezing its pension plan about two decades ago, IBM’s pension plan became significantly overfunded, according to Milliman, an actuarial firm.
One reason companies are considering this is that for some, their pension plans are in better shape. In a 2024 study, Milliman analyzed 100 of the largest corporate defined benefits plans in the U.S. and found that 48 of the plans were fully funded or better, and 36 were frozen plans with surplus assets, thanks to investment returns and favorable interest rates.
Can Boeing be pressured to change its mind?
Pressure to end the strike is growing on new CEO Kelly Ortberg. Since the walkout started on Sept. 13, he announced about 17,000 layoffs and steps to raise more money from the sale of stock or debt to shore up the company’s finances.
Bank of America analysts estimate that Boeing is losing about $50 million a day during the strike. If it goes 58 days — the average of the last several strikes at Boeing — the cost could reach nearly $3 billion.
“We see more benefit to (Boeing) improving the deal further and reaching a faster resolution,” the analysts said. “In the long run, we see the benefits of making a generous offer and dealing with increased labor inputs outpacing the financial strain caused by prolonged disruptions.”
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Manuel Valdes in Seattle contributed to this report. Koenig reported from Dallas, and Bussewitz reported from New York.
