World Business

In contract talks, Boeing embraces defined-contribution plans that grow less, but free up company money

by Joseph Weber

Watch untranslated video:

Scott Carson, CEO of Boeing’s Commercial Airplanes Div. Bulent Kilic/AFP/Getty Images

Boeing, like many other companies, wants to phase off traditional pensions and instead put recently made known workers into a 401(k)-like delineation. As Boeing’s contract talks with its two chief unions gather visible vapor in August, the issue is catching on heat.

The move, company spokesman Timothy Healy says, would free up money in quest of research and development or other purposes that Boeing (BA) now must set aside for pension plans whenever one investing., in the stock market or elsewhere, comes up short. Along with the doubtfulness this brings to Boeing’s budget, the require to be paid towards funding its allowance plans can run into the billions, since the liability for them now totals about $46 billion—not alienated from Boeing’s own market value.

For nonunion workers, Boeing plans to close off a traditional represent at the end of this year, putting new staffers into a so-called defined-contribution plan. Boeing’s contribution to that plan is limited, fixed, and predictable. Gains self-reliance fluctuate with investment values.

The aerospace giant wants to do the same through union employees, but is running into resistance from its two largest unions, the International Association of Machinists and the Society of Professional Engineering Employees in Aerospace. The fellowship has been in preliminary talks with the two, and the negotiations are slated to breed serious on Aug. 21. The unions have violently opponent the change in briefings with reporters.

"Nobody in continuance the payroll today is willing to sell out their kids—the next generation of workers," says Connie Kelliher, a spokeswoman for the IAM, whose contract with Boeing expires on Sept. 3. She cites the stock market’s recent feud as proof that retirement plans with no guaranteed benefits are a bad idea.

But Boeing has plenty of company in offering plans that would mask much of the drag weight for retirement-plan gains onto employees. While 83% of midsize and large companies surveyed by Hewitt Associates in 1990 offered traditional plans, and only 14% offered defined-contribution plans, the picture has before this reversed: Only 21% of of the allied kind companies now offer traditional plans, under which circumstances 61% offer defined-contribution plans. Some 18% now offer cash balance-plus-pension equity plans, hybrids that deliver returns more like Treasury rates than those equities can provide in positive seasons.