Boeing's Year Turns Sour Following IAM Contract

ST. LOUIS – Midway through 2001, there were nothing but positive feelings at the headquarters of Boeing Co.'s military division.

On May 20, the International Association of Machinists and Aerospace Workers rank and file, by a wide margin, rejected a tentative contract agreement. The strike vote that followed passed overwhelmingly.

But the company convinced the union's local leadership to return to the bargaining table. Days later with a new contract proposal in hand, 75 percent of members of District 837 voted to stay on the job, focused solely on winning the most lucrative contract in Defense Department history.

Both sides were convinced that Boeing's design for the next generation Joint Strike Fighter would win a $300 billion contract battle with rival Lockheed Martin Corp.

"The Joint Strike Fighter, it is safe to say, was a driving factor for both sides," Boeing spokeswoman Jo Anne Davis said after the vote.

A few months later, the cocksure smiles worn by both sides after that contract vote were replaced with grim stares.

Lockheed got the JSF, leaving the long-term future of local jet fighter work in doubt just weeks after the Sept. 11 terrorist attacks had decimated orders in the company's commercial division, leading to plans for thousands of layoffs.

Short term, in 2002 and for the next several years, the prospects of Boeing's St. Louis-based Military Aircraft and Missile Systems division remain solid. Work on the F/A-18 Super Hornet, a fighter Boeing calls the cornerstone of U.S. naval aviation, continues for another decade. While work on the F-15E draws to a close, South Korea still is considering ordering a version of the plane for its air force.

But beyond that, Boeing's military group — led by CEO Jerry Daniels -- is looking for business. Finding some soon is essential, Daniels has said repeatedly in the weeks after losing the JSF contract, in order to keep the skills that turn metal and composites into jet fighters from "perishing."

That search already is taking shape. Shortly after the JSF decision, Boeing placed Mike Heinz, the No. 2 employee on JSF project, in charge of a new division that will coordinate Boeing's efforts on unmanned vehicles.

Late last year, Boeing unwrapped the X-45A — the Unmanned Combat Air Vehicle — a joint development venture with the Defense Department's research agency. Testing continues in California on the St. Louis-built project that Heinz said Boeing is committed to developing into a major business.

While Daniels stressed after the JSF contract loss that Boeing isn't interested in becoming a full-time subcontractor, the company has met with officials at Lockheed about working on the project. That remains a focus in Washington of Missouri Sen. Kit Bond, who vocally called for duel production lines before — and after — the contract was awarded.

As a member of the Appropriations Committee's defense spending panel, Bond wants a $1.5 million, six-month study to look at the potential dangers of having only one U.S. company able to make fighter jets.

"If the study says that we must have two full-up production lines, then the Pentagon and the president and we in the Congress will have to deal with that," Bond said.

Rep. Todd Akin, R-Mo., said he wouldn't have thought the study was needed before the Pentagon awarded the JSF contract to a sole producer.

"But I do now," Akin, a member of the House Armed Services Committee, said. "When that is the only producer geared up to make fighter planes, it makes a pretty tempting target for somebody.

"Even the Soviets have two fighter plane manufacturers."

Away from its fighter business, Boeing is also looking to Congress for help in Wichita, Kan., where the company is preparing to lay off 5,000 commercial division workers.

On Dec. 18, House and Senate negotiators approved a plan to have the Air Force lease 100 of the company's 767s, which will be converted into military midair refueling planes. The Bush administration estimates it will cost $22 billion.

The Boeing 767 tankers would replace the aging KC-135 Stratotanker, which as the most common refueling plane has proved essential to the lengthy bombing campaign over Afghanistan. The average KC-135s is more than 40 years old.

Because Boeing Wichita is doing modifications on Boeing 767 tankers for the Italian government, and because its workers also re-engine the KC-135, company officials have said Wichita could get much of the leasing work. Such a program also could add management jobs in St. Louis.

Rep. Todd Tiahrt, R-Kan., said the deal between the House and Senate did not include an agreement on where the modifications would take place, although he is lobbying for Boeing's Wichita plant to get the work.

A company executive said Boeing will likely make a decision early next year on where the work will be done.