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Boeing machinists approve contract securing 777X jet

Ballots are pictured at the International Association of Machinists and Aerospace Workers (IAM) District Lodge 751 headquarters in Seattle,
Ballots are pictured at the International Association of Machinists and Aerospace Workers (IAM) District Lodge 751 headquarters in Seattle,

By Alwyn Scott, Jonathan Kaminsky and Bill Rigby

SEATTLE/NEW YORK (Reuters) - Boeing's machinists on Friday narrowly approved a crucial labor contract that secured thousands of jobs and billions of dollars of economic activity for Washington state but will cost workers their pensions.

The vote of 51 percent to 49 percent to accept the deal means Boeing Co will build its new 777X jetliner and wings in the Seattle area, where Boeing has built aircraft for more than 90 years.

Had the workers rejected the offer, Boeing would have considered making the successor to its popular 777 widebody jet elsewhere, and had received offers from 22 states interested in hosting the new factory.

"This decision means Boeing hopefully will stop pursuit of another site for its 777X program," said a somber Jim Bearden, administrative assistant to machinist District 751 President Tom Wroblewski.

"They held a gun to our head and our people were afraid," said Lester Mullen, a District 751 council delegate who works on the current 777 wing production line.

Boeing's reaction was in stark contrast to the mood in the Seattle union hall where the results were announced.

"The future of Boeing in the Puget Sound region has never looked brighter," Boeing Commercial Airplanes Chief Executive Ray Conner said in a statement. "This will put our workforce on the cutting edge of composite technology, while sustaining thousands of local jobs for years to come."

NO STRIKE BEFORE 2024

In clinching the agreement, Boeing secured the location favored by analysts and investors, who saw far lower risk in using the factory and workers who now build the 777.

Boeing also ensured that the machinists won't have an opportunity to strike until 2024, when the new contract expires.

The decision drew praise from political leaders who had brought pressure to bear on the union to approve the deal.

"I'm very pleased that the best place in the world to build jet airliners for decades will continue for decades to come," said Governor Jay Inslee in a brief media conference in the state capital Olympia. "This has been a long road, and I respect everyone who has worked on it, but now's the time to come together, go build this airplane. I'm happy about that."

Addressing a concern raised by union members, Inslee said there were safeguards in recently passed state legislation giving $8.7 billion in incentives to Boeing and the industry to ensure the plane maker keeps 777X jobs in Washington state and doesn't open a second line in another state, as it did in South Carolina with the 787 Dreamliner.

After winning the incentives and the contract vote, "it is time for Boeing to hold up its end of the bargain," said Rep. Rick Larsen, whose congressional district includes the 777 factory. "Washington has shown that we stand behind a strong aerospace industry. Boeing should make the same commitment to our state."

Workers had argued that with Boeing earning healthy profits, and its share price at a record high, it should not be demanding that its workers give up past contract gains.

The choice Boeing offered had opened deep rifts between the local International Association of Machinists and Aerospace Workers (IAM), which opposed the contract, and its Washington, D.C.-based leadership, which forced a vote on the proposal.

It had also revealed cleavages between younger workers open to the deal and older workers dead set against it. Some 49 percent of the machinists are 50 or older, the union said.

In November, two-thirds of machinists voted against Boeing's first offer, which would have replaced their traditional defined-benefit pension with a defined-contribution savings plan, one of two retirement plans the workers receive.

The union's national leadership negotiated that deal. But local leaders opposed it, saying the take-aways were too great.

In the vote on Friday, members approved an eight-year contract extension that the union said provided $1 billion in additional benefits beyond the prior offer, but that will halt pension contributions in 2016.

SHARP DIVISION

About 600 votes separated yes from no, union officials said. Some members wanted a recount, but the national leaders would not allow it, said Wilson Ferguson, vice president of District 751.

Ferguson said about 8,000 members did not vote, up from 5,000 in the prior ballot in November. The union has about 31,000 eligible members.

Before the vote, a member filed a complaint with the National Labor Relations Board taking issue with the timing, just after Boeing's traditional closure between Christmas and the New Year, when many workers were away, the union said. The union allowed online absentee voting.

The divide between the local leaders and their national counterparts is mirrored by divisions over the contract that appear to cleave along age lines.

Younger machinists had voiced strong concern that failing to vote for the contract would cost them their jobs as Boeing moves the work elsewhere. The 777X is the last major development on Boeing's books for the next 15 years. If the plane was built elsewhere, it would have slowly eroded aerospace jobs in Washington. The average wage is $29 an hour.

Many older workers, however, had said the pension was sacred and was worth risking job loss.

"There's plenty of aviation work in the world," said Kevin Flynn, an aviation maintenance technician inspector, who has filed a separate complaint against the national union leaders with the National Labor Relations Board for holding the vote against the wishes of a majority of members.

"I'll just have to move to where the work is."

Tom Captain, head of the global aerospace and defense practice at Deloitte, said the difficult decision the union faced reflected the fact that aerospace work can be moved to new locations and that price competition between Boeing and rival plane maker Airbus is fierce.

"Although painful tense and emotional, it is clear that there is a sober recognition of the new reality in commercial aerospace manufacturing," he said.

(Reporting by Alwyn Scott and Jonathan Kaminsky; Editing by Nick Macfie)

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