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Boeing says pay freeze counterproductive

Feb. 19, 2009, Seattle, WA - Freezing wages and eliminating bonuses to avoid layoff would be counterproductive for the Boeing Co.


February 19, 2009
By Tim Klass

Feb. 19, 2009, Seattle, WA – Freezing wages and eliminating bonuses to avoid layoff
would be counterproductive for the Boeing Co. and other big
employers, the aerospace company's chief executive said.

In an email Tuesday to Boeing employees, printed in full on the
website of the Seattle Post-Intelligencer newspaper Wednesday, CEO
Jim McNerney wrote that such moves would hurt the company's ability
to attract and retain high-performing employees.

The memo is one of the first responses by a major corporate chief
executive to proposals for layoff alternatives. Such requests have
gained force in the deepening recession since President Barack Obama
praised "the selflessness of workers who would rather cut their
hours than see a friend lose their job'' in his inaugural address
last month.

"More than a few of you have written to me asking whether we
could avoid layoffs altogether by not paying incentive awards this
year or by freezing wages across the board,'' McNerney noted.

He said such actions would preserve some cash during the year and
lessen the immediate impact on people, but "our judgment (and one
shared by most major companies) is that they would put us at
competitive disadvantage.''

Since Jan. 1 Boeing has announced plans to lay off about 10,000
employees, mostly in overhead and military-related positions but few
in the commercial airplane production and engineering jobs.

Ray Gorforth, executive director of the Society for Professional
Engineering Employees in Aerospace, which represents more than
20,000 engineers, scientists and technical workers at Boeing, said
the union expected to get word from the company Friday on which
positions would likely be eliminated.

Initial indications are that about half the layoffs will be in
the Shared Services Group, based in suburban Renton, which handles
site services, building maintenance and related work; one-third from
Integrated Defence Systems; 800 positions in information technology
and "hundreds to a few thousands of engineers,'' Goforth said.

Suggestions for pay concessions to preserve jobs have been made
within SPEEA but no union body has taken any position on the issue,
he added.

"Lots of members have brought that up, and we've explained to
them that this company doesn't care because this is not about a
cash-flow problem,'' Goforth said.

There was no immediate response to requests for comment from the
International Association of Machinists and Aerospace Workers, which
represents more than 27,000 hourly production workers.

Both unions negotiated contracts with pay raises last fall, the
Machinists after an eight-week strike that was cited in McNerney's
e-mail and in previous statements as a prime cause for delays and
hits to the company's bottom line in 2008.

Goforth said performance problems to which McNerney alluded, including production delays in the new 787 and 747-8 jetliners, were
largely the result of errors that did not involve employees, such as
improper and wrongly installed fasteners in components made by
subcontractors.

"The problem they do have is with their ability to deliver the
products they sell,'' he said. "That is a management problem.
Frankly, these layoffs are an attempt to divert attention from these
management failures.''

John Dern, a Boeing spokesman, said he knew of no formal
proposals by any of Boeing's unions for employee pay concessions in
exchange for job preservation.

Bonuses for top executives, raises for non-union staff an
incentive payments to about 114,000 of the company's 160,000
employees under Boeing's performance-based Employee Incentive Plan
will likely be lower because of the recession, Dern said.

Last month Boeing said enough financial targets were met in 2008
for EIP-eligible employees to receive six extra days of pay, a total
of $220 million.

At the same time, McNerney wrote, “we are consciously
restraining salary growth this year in order to lessen the number of
job cuts we need to make while retaining flexibility to fund growth
projects.''

Boeing Commercial Airplanes began the year with an order backlog
of about 3,700 planes totalling $352 billion over the next several
years or longer. Since Jan. 1 Boeing has announced orders for 18
planes of various models and cancellation of 31 orders for the 787s,
a net loss of 13 orders this year.

In a visit to Seattle earlier this month, Steven F. Udvar-Hazy,
founder and chairman of International Lease Finance Corp., the
world's biggest airplane leasing company and the biggest customer of
Boeing and Airbus, told reporters he believes Boeing could cut
production by as much as 35 per cent over the next 18 months as
airlines defer orders.

Boeing's latest forecast is for the company to deliver 480 to 485
planes this year.

THE ASSOCIATED PRESS