With Boeing jetliner production frozen as a strike by the 26,800-member International Association of Machinists and Aerospace Workers rolls into its second week, the airframer and its largest union appear locked into a struggle over the future of the company.

The confrontation centres on the role of outsourced responsibilities once held by machinists inside Boeing facilities, and the outcome of the battle is likely to have an impact on the company well beyond the troubled early years of the 787 programme.

IAM voted by 80% to reject Boeing's offer of an 11% increase in pay over three years plus bonuses, and was 87% in support of a strike. But its membership emphasised that the key issue was new contractual provisions that could extend the extensive components outsourcing to Boeing's legacy programmes that characterises the 787 programme.

 787 production

The strike has left four 787 flight-test aircraft, about 18 777s and twice as many 737s, as well as a handful of 767 and 747s languishing at various states of assembly at three Boeing facilities in Washington state.

In a cyclical industry, Boeing's business case for outsourcing pits oversight against stability. The shared responsibility and risk of the programme, Boeing argues, insulates the company from the painful cyclical industry downturns, opting for stability over the direct control of suppliers.

Without having to manage a native workforce beyond a core final-assembly team, Boeing would need only to specify the rate at which suppliers deliver to the company, maximising productivity and better managing the aircraft backlog. Thus the responsibility for managing the much of the workforce - including taking lay-off decisions in a downturn - would become the responsibility of suppliers and subcontractors, not Boeing.

The goal is to "get the volatility out of the programme," says Merrill Lynch industry analyst Ron Epstein, who emphasises that the key to success becomes the strategies employed in managing the outsourcing.

But, critically, the underlying business case for outsourcing pre-supposes a supply chain able to meet the demands of its customer. In the first 16 months of final-assembly operations, the significantly outsourced 787 supply chain found itself unable to keep pace with the early and aggressive demands of the programme schedule, forcing at least a 15-month delay in the first delivery to Japan's All Nippon Airways.

Boeing has moved to regain supply-chain oversight, but both the IAM and SPEEA - the union of engineers readying for a contract battle of its own - contend that the 787 programme would have been able to avoid its early problems had a larger share of work been allocated to Boeing employees.

Boeing chief financial officer James Bell told investors to expect at least a month's delay: "Right now it's a one-for-one day slip on the 787 and all other programmes as well."

On the other side of the picket line, the union appears to be preparing for a prolonged fight, advising its members, who will lose their health insurance on 1 October: "If you have ongoing prescriptions, fill them NOW and fill them again before the end of September."

Follow Jon Ostrower's coverage of the strike on his blog: FlightBlogger

Source: Flight International