Al Root

Boeing and its Machinists union haven't made any progress in recent talks to end a labor strike. If the union holds fast to one of its demands, it will be tough to end the work stoppage soon.

Friday night, the International Association of Machinists and Aerospace Workers Local 751 -- the main union local representing some 33,000 Boeing employees in the Pacific Northwest -- tweeted that talks between the two sides have broken off with little progress and "we have no further dates scheduled at this time."

Boeing has offered base wage increases of about 30% over the life of a four-year contract and some enhancements to retirement benefits. The union, however, wants to shift back to a defined pension plan from 401(k) packages.

"The company remains adamant that it will not unfreeze the defined benefit plan," read part of the union's Friday update.

Going back to a defined pension is very unlikely. Defined benefit pension plans have simply become exceedingly rare outside of the government. Only about 15% of private workers have access to a defined benefit plan, according to the Bureau of Labor Statists. (The ratio for government workers is about 85%.) What's more, 66% of private workers have access to a defined contribution plan such as a 401(k).

In a defined contribution plan, the company gives the worker a fixed amount of money and it's up to the worker to save for retirement, letting the stock and bond markets grow the value of the account over time. In a defined benefit plan, the company guarantees workers payouts upon retirement, and it's up to the company to set aside money, and manage it, to pay retiree benefits.

In theory, the differences in retirement outcomes for workers in both systems should be similar. The burden, and stress, of saving enough, managing a portfolio, and taking distributions upon retirement, shift from the company to workers in a defined contribution paradigm.

Workers have adapted, though. There is about $11 trillion invested in 401(k)-like defined contribution plans and another $14.5 trillion in IRAs. That compares with $3.2 trillion in company-sponsored defined benefit plans.

But "you've got a powerful union that's riding the wave of union power that we haven't seen in 40 years," says Jane Jacobs, a partner in Tarter Krinsky & Drogin's labor and employment practice. Still, she was "astounded" by the ask. "They're asking for a dinosaur."

Boeing might have to offer better 401(k) matching or more pay to break the deadlock. Boeing is currently offering to match 100% of an employee's contribution up to 8% of pay, plus the company's automatic 4% contribution to the 401(k) plan.

Demands such as a defined benefit pension raise the likelihood of a longer strike. Jefferies analyst Sheila Kahyaoglu cut her 2024 commercial plane deliveries to 422 from 480. "The length of the IAM strike is unpredictable, but our baseline assumes an early Oct. end," wrote Kahyaoglu in a Sunday report.

Eventually, the planes will get delivered. Boeing has a backlog that stretches out for years and airlines want the planes. Boeing's peer Airbus can't simply make more, either.

That means Boeing can eventually recover from the 2024 strike, but investors, the company, the industry -- and eventually the workers -- need to see it end.

Through Friday trading, Boeing stock was down about 40% this year. Shares were down about 37% since the Jan. 5 emergency door plug blowout on a 737 MAX 9 jet operated by Alaska Air. The stock is down about 4% since the strike began on Sept 13.

Write to Al Root at allen.root@dowjones.com

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September 29, 2024 12:34 ET (16:34 GMT)

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