CHICAGO - Management finally blinked in the 24-day game of chicken between Boeing Co. and its biggest union.
Faced with escalating costs and the potential for damaged customer relationships, Boeing and the Machinists union tentatively agreed Friday to end a strike that idled more than 18,000 workers and shut down commercial airplane production for almost a month.
The deal, which is subject to a union ratification vote Thursday, gives the Machinists what they wanted most - better pension benefits, no increase in out-of-pocket health care costs and more rights for senior workers.
"Our membership accomplished what they set out to do," said Mark Blondin, president of District 751 of the Machinists union. "Their solidarity got Boeing back to the bargaining table."
The agreement also would allow Boeing to resume commercial airplane production quickly at a time when competition between it and European rival Airbus SAS has never been fiercer. At stake are customers who might turn to Airbus.
"If I were them, I would be worried about what it means for customers," said one former top Boeing executive. "It takes years and years and years to build relationships with these guys and one screwup to ruin it."
Riding the popularity of its new 787 Dreamliner - a mid-sized, double-aisle plane with 250 seats - Boeing booked orders for more than 600 planes so far this year and arrested the market share slide that allowed Airbus to swoop into the industry lead two years ago. The fuel-efficient jetliner is expected to begin service in 2008.
Only a few weeks ago Alan R. Mulally, chief of the company's commercial airplane unit, claimed in a message to managers that the union's demands for improved benefits would cost the company "$1 billion" more than it had offered.
Agreeing to the union's offer would have "eroded our ability to compete," he said, and would have wiped out the cost savings achieved since the company's last contract with the Machinists in 2002.
But yesterday, Boeing agreed to many of those demands and in a statement Mulally said, "the total cost to Boeing [of the new offer] is similar to the previous contract offer and meets our definition of a reasonable settlement."
Boeing and the union had been at loggerheads until late last week when teams led by Mulally and the Machinists' Blondin flew to Washington for a secret negotiating session mediated by former Rep. Richard A. Gephardt, whom Boeing hired as a consultant before the strike began.
Mulally wasn't available for comment, but said in a statement that the company took a harder look at what was important to the Machinists union and adjusted its offer accordingly.
Because the average age of union members is close to 50, for instance, pension and health care issues are paramount. The union had asked the company to raise the "pension multiplier" for each year of employment to $80 from $60. (That's the number used to calculate the monthly pension check for each retiree.) Boeing's last offer was $66. But in the new deal, it bumped its offer to $70.
Like many employers, Boeing pushed the union at first to participate much more fully in its health care costs and retiree health benefits. In the new agreement, however, those benefits remain unchanged.
Boeing also acquiesced to various changes in work rules that protect seniority and keep some jobs in house. And it agreed to give union members bonuses that amount to $11,200 per worker over the three years of the contract.
Mulally said in the statement that the company will save money on several things that have been dropped from the final deal, including a slight wage increase.
Michael Oneal writes for the Chicago Tribune.