Machinists union calls latest Boeing contract offer 'an insult'

Boeing's machinists union, whose labor agreement expires Sept. 1,said the initial contract proposal from the world's largest aircraftmaker is "an insult" and fell short of demands on health care andpensions.

Boeing's proposal offers "meager" pension increases, reducesmedical benefits for current workers, and eliminates retiree healthcoverage for new hires, the International Association of Machinistsand Aerospace Workers union said.

The union, Boeing's largest, is seeking higher benefits amid thestrongest demand for Boeing's commercial airplanes in almost fiveyears. The three-year contract would cover about 18,300 workers, orabout 12 percent of Chicago-based Boeing's work force. In 2002, asairliner orders slumped, the machinists failed to get enough votesfor a strike after rejecting Boeing's final offer.

"They want a piece of the action," said Myles Walton, a Boston-based analyst with CIBC world markets. "The unions are in a strongerposition than they have been historically. They have more leveragethan in 2002." Walton has a "sector perform" rating on the stock anddoesn't own shares.

The proposal submitted Wednesday isn't Boeing's best and finaloffer, and the two sides will continue negotiating through theweekend, Boeing spokesman Charles Bickers said. The final contractproposal will be submitted on or before Tuesday, he said. The twosides began the two-week talks Aug. 15 at a hotel near Seattle-Tacoma International Airport.

The union also said the initial proposal lacks job securityprovisions, adds costs for retiree medical benefits, and reducesmedical benefits for laid-off employees.

"Our overall offer included several provisions to enhance jobsecurity," Jerry Calhoun, Boeing's lead negotiator said in a memo tomanagers. "Still, we continue to believe that job security depends onour ability to improve quality and productivity."

Boeing shares have risen about 87 percent since the current laboragreement took effect in September 2002. They rose 8 cents Thursdayto $67.21. The shares have climbed 30 percent this year.

Boeing had net orders for 417 planes in the first half of theyear, about five times more than a year earlier.

Bloomberg News