Boe­ing braces for re­tirees’ im­pact

De­par­ture of skilled la­bor could clip its wings

Baltimore Sun - - BUSINESS - By Julie Johns­son

John Roth­ery said his good­byes, handed in his badge and walked away from Boe­ing. He­had worked on al­most ev­ery com­mer­cial jet model over four decades, from a 707 bristling with mil­i­tary radar in the late 1970s to to­day’s sleek 787 Dream­liner.

The date, Oct. 3, had been cir­cled on Roth­ery’s cal­en­dar for more than a year. It was the last time that Boe­ing would bump up pen­sion pay for Seat­tle-area fac­tory work­ers before it froze the plan at month’s end, pro­vi­sions dic­tated by a deeply un­pop­u­lar 2014 con­tract ex­ten­sion. For Roth­ery, it was the fi­nal straw.

“I’ll be 64 in Novem­ber. Af­ter 37 years, that’s enough,” said Roth­ery, a tool-and-die maker. “I was work­ing just to build a pen­sion. As of Oct. 31, there’s no pen­sion. Why stay?”

The ben­e­fit change could has­ten a gen­er­a­tional shift as Boe­ing’s baby boomers re­tire, a trend that’s also loom­ing for other U.S. man­u­fac­tur­ers. The plane maker’s most ex­pe­ri­enced work­ers are pack­ing up their tools dur­ing crit­i­cal up­grades of its two largest profit-driv­ers: the 737 and 777 jet­lin­ers. About 10,000 me­chan­ics are el­i­gi­ble to re­tire from the com­pany’s Puget Sound man­u­fac­tur­ing base alone, and no one knows how many are poised to leave.

“It’s a conversation that any­one who is close to re­tire­ment is hav­ing,” said Becky Beasley, 75, a grandmother and body-struc­tures me­chanic who helps rivet to­gether hulk­ing alu­minum pan­els to form the 777’s hull.

Boe­ing is well aware of the risks: Short­ages of skilled Boe­ing’s pro­duc­tion of jet­lin­ers could be threat­ened by an ex­o­dus of skilled la­bor as older work­ers re­tire or take buy­outs. work­ers from a smaller, mid-1990s ex­o­dus con­trib­uted to a fac­tory melt­down that halted pro­duc­tion of its cash cow, the 737. So ear­lier this year, the man­u­fac­turer care­fully struc­tured a vol­un­tary lay­off aimed at re­tire­ment-age work­ers, stag­ger­ing the de­par­tures of 1,057 ma­chin­ists to avoid mas­sive dis­rup­tions.

“We had that very much in mind,” said Joelle Den­ney, vice pres­i­dent for hu­man re­sources at Boe­ing’s com­mer­cial air­plane di­vi­sion, of the 1995 tu­mult. As the date ap­proached when pen­sion ben­e­fits would stop ac­cru­ing, work­ers had been leav­ing in a steady stream.

“We’re not ex­pect­ing a big bub­ble or wave,” Den­ney said.

U.S. man­u­fac­tur­ers are grap­pling with a loom­ing short­age of skilled work­ers. Al­most 3.5 mil­lion man­u­fac­tur­ing po­si­tions will need to be filled over the next decade as baby boomers re­tire, and 2 mil­lion of those jobs could re­main va­cant be­cause of man­u­fac­tur­ing’s fad­ing ap­peal to mil­len­ni­als, ac­cord­ing to a 2015 study by Deloitte and the Man­u­fac­tur­ing In­sti­tute.

The dilemma could be es­pe­cially acute for Boe­ing, where about 35 per­cent of the 29,645 ma­chin­ists in the com­pany’s Seat­tle in­dus­trial hub are 55 or older. By con­trast, only 23 per­cent of the 15.3 mil­lion Amer­i­cans work­ing in man­u­fac­tur­ing are in that age group, ac­cord­ing to the U.S. Bureau of La­bor Statis­tics.

For the long haul, the plane maker is in­vest­ing in ed­u­ca­tion — from vo­ca­tional train­ing to pro­grams at mid­dle schools — to try to make man­u­fac­tur­ing “cool” to a gen­er­a­tion that has never known shop class, Den­ney said. In the short term, Boe- ing is step­ping up train­ing and men­tor­ing pro­grams within its fac­to­ries, she said.

Some ques­tion whether the com­pany is do­ing enough.

“I do think that if peo­ple de­cide to leave en masse, that they can­not re­place that work­force,” said Jon Holden, pres­i­dent of the In­ter­na­tional As­so­ci­a­tion of Ma­chin­ists and Aero­space Work­ers, Dis­trict 751. “There’s not enough in the pipe­line to re­place them.”

Mem­o­ries are still vivid of the cas­cad­ing pro­duc­tion is­sues two decades ago af­ter Boe­ing of­fered a one-time re­tire­ment in­cen­tive with few re­stric­tions. More than 3,700 me­chan­ics, en­gi­neers and tech­ni­cal work­ers cashed out in June and July 1995 alone, cre­at­ing im­me­di­ate short­ages in some po­si­tions.

Many later were re­hired as con­trac­tors as Boe­ing’s fac­to­ries strug­gled to keep pace with a sales spurt. The short­fall con­trib­uted to pro­duc­tion melt­downs in 1997 that forced the man­u­fac­turer to tem­po­rar­ily halt its 747 and 737 assem­bly lines to catch up.

The cost to Boe­ing: a $1.6 bil­lion pre­tax ac­count­ing loss.

This year, Boe­ing closely man­aged who par­tic­i­pated in the vol­un­tary lay­off of­fer, me­thod­i­cally plan­ning for their re­place­ment and chart­ing when they left the com­pany, Den­ney said. The mea­sure tar­geted em­ploy­ees and man­agers on the cusp of re­tire­ment by of­fer­ing as many as 26 weeks of pay and ac­cel­er­ated re­tire­ment ben­e­fits.

Boe­ing is try­ing to make its op­er­a­tions more ef­fi­cient as it trims spend­ing and au­to­mates more pro­duc­tion amid cut-throat com­pe­ti­tion for slow­ing air­craft sales. The com­pany has elim­i­nated 4,853 jobs in the state of Wash­ing­ton since the end of Jan­uary, a 6.2 per­cent re­duc­tion.

But while Boe­ing can con­trol who leaves through the vol­un­tary lay­off, any­one can re­tire.

That raises a risk of crit­i­cal short­ages of skilled la­bor with an in­tu­itive feel for fab­ri­cat­ing and as­sem­bling planes — among the most com­pli­cated ma­chines on the planet.

“The tricky as­pect for the ex­ec­u­tives is not to lose too many skilled po­si­tions too quickly,” said Leon Grun­berg, a so­ci­ol­o­gist and coau­thor of “Emerg­ing from Tur­bu­lence: Boe­ing and the Amer­i­can Work­place To­day.” “Can Boe­ing min­i­mize the risk of los­ing the tribal knowl­edge?”

Those leav­ing now will re­ceive monthly pen­sion pay­ments of $95 for each year of em­ploy­ment. That amounts to about $34,200 an­nu­ally for a 30-year Boe­ing vet­eran. While that cov­ers ba­sic ne­ces­si­ties, re­tirees will also need sav­ings to main­tain their lifestyles, an­other fac­tor that makes it dif­fi­cult to pre­dict near-term at­tri­tion.

Beasley, the body-struc­tures me­chanic, doesn’t have a suf­fi­ciently large nest egg af­ter 18 years at Boe­ing. She’s also putting a grand­son through law school.

“I’m a lit­tle con­cerned about my fi­nan­cial sta­bil­ity when I leave,” she said. “Social Se­cu­rity would barely cover the house pay­ments.”

Roth­ery, the newly re­tired tool- and- die maker, is look­ing for­ward to golf, soc­cer and road trips in a motor home af­ter wrap­ping up his ca­reer at Boe­ing’s Fred­er­ick­son, Wash., plant.

His fu­ture is se­cure: 401(k) plan ac­counts of $750,000 or more aren’t un­usual for ca­reer work­ers who saved care­fully, Roth­ery said.

DAVID RY­DER/BLOOMBERG NEWS

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