December 26, 2013
Jim McNerney, CEO
The Boeing Company
100 North Riverside
Chicago, IL 60606
Dear Mr. McNerney:
The squeeze that you and Boeing are putting on your machinist workers' pensions, pay scales and your stance on other labor issues regarding the assembling of the new 777X airliners is unseemly for several reasons.
First, consider your pay this year of $21.1 million, a 15 percent increase from the previous year, and much higher than your predecessors. That sum does not demonstrate a moral authority to require sacrifices from your workers at a time of rising Boeing sales and profits, dividend increases, cash hoard, and another notorious $10 billion stock buyback. I say notorious because stock buybacks per se do little for shareholder values and a lot for the enlarged stock options of top executives.
Second, you're holding an auction for your long-time workers jobs in other states, inciting a bidding war whereby states are giving away taxpayer assets to lure your 777X assembly factory with huge tax holidays and other subsidies. Washington state outdid itself with a new law, signed by Governor Jay Inslee with the largest state business tax break package for Boeing in history. The tax escape law "will give Boeing and its suppliers about $8.7 billion in tax breaks between now and 2040," according to the Citizens for Tax Justice (CTJ) calculations. CTJ adds that "Boeing has managed to avoid paying even a dime of state income taxes nationwide on $35 billion in pretax U.S. profits." Boeing also received tax advantages from the federal government, including $1.8 billion in federal income tax rebates on its $35 billion in U.S. profits between 2003 and 2012.
Third, in 1997 the Justice Department allowed Boeing to merge with McDonnell Douglas, making Boeing the only manufacturer of commercial jet planes in the United States - a domestic monopoly, justified by the only other foreign competitor - Airbus Industries in Europe. Another valuable gift by Uncle Sam brought about by your company's Washington lobbyists.
Fourth, recall Boeing's contract with the Department of Defense for the initial phase of Air Force's KC-46 aerial tanker program that provoked sharp criticism by Senator John McCain in July 2011 for the excessive burdens on American taxpayers from cost over-runs in a supposed "fixed price" contract. In a letter to Department of Defense Undersecretary Ashton B. Carter, Senator McCain wondered "why under a fixed-price, relatively low-risk contract, taxpayers may have to pay 60 percent of any overrun within that band - up to $600 million."
A book could be written about the Boeing company's strategy for externalization of a variety of its costs onto innocent, defensely people - whether workers or taxpayers. Boeing's systemic campaigns for corporate welfare are shameful. Your company is one of the major corporate welfare kings in America, running a close race with the champion - General Electric. As CTJ wrote: Boeing "employs an army of site location and tax consultants, whose job has been to blackmail states into giving Boeing lavish tax breaks." These include sales and property tax breaks which drain communities' ability to provide for school and other public facilities (http://www.goodjobsfirst.org/corporate-subsidy-watch/boeing).
Fifth, there is the gigantic subject of your outsourcing to foreign suppliers, in particular Japan where your technology transfers, damaging the longer term viability of U.S. competitiveness in the aerospace sector for short term gains favoring Boeing, merit thorough examination by the Congress. As you know Boeing's foreign outsourcing brought your company considerable quality control and delay troubles with the Dreamliner.
You need to read the 2005 report by the Defense Science Board about the hollowing out of domestic capability in the electronics industry from this kind of overseas outsourcing migration by U.S. companies.
For starters read the current copy of The American Conservative magazine's cover story titled "Japan's Plan to Unmake Boeing," describing the full assistance of Boeing. No doubt, if your further cruel downward pressure on your machinists culminates in your destroying their union local and their jobs by leaving the state of Washington and going for example to the anti-union state of South Carolina, there will be further public inquiries. Such as how perverse incentives provided by your suppliers in Japan and elsewhere have furthered job losses here and accelerated your company's technology transfers perhaps beyond the tipping point against the U.S. national interest.
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