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Developments in aerospace.

Development in aerospace

Recent settlements in the aerospace industry reflected a tough bargaining environment brought about by reductions in defense spending, cuts in aircraft purchases by major airlines, and the loss of thousands of aerospace jobs. As a result, many of the settlements include cost control features, such as lump-sum bonuses in lieu of general wage increases, health care cost containment arrangements, and more attractive retirement programs.

After overwhelmingly rejecting a contract proposal last March, Machinists members at Lockheed Corp.'s three largest operating units agreed to 3-year contract proposals covering about 11,000 workers: 5,300 at Lockheed Aeronautical Systems in Marietta, GA; 4,200 at Lockheed Missile & Space Co. in Sunnyvale, CA; and 1,600 at Lockheed Advanced Development Co. in Burbank and Palmdale, CA. A settlement was reached after the union agreed to bonuses in lieu of increases in general wages, increased employee health care copayments, and less generous cost-of-living adjustment (COLA) allowances.

The pacts call for a $1,500 ratification bonus; wage increases of 3 percent in the second and third years of the agreement; a change in the COLA formula that reportedly would cut COLA payments by two-thirds; lump-sum payments of $1,200 upon ratification, $500 in December 1993, and $676 in December 1994, designed to minimize the adverse impact of the change in the COLA formula; and increases of 25 cents an hour three times a year in the automatic wage rate progression.

Bargainers agreed to several changes in health care benefit provisions, including employee cost-sharing of premiums. They set employees' minimum weekly premiums at $3 for single coverage and $7 for family coverage in the first year and $8 in the second and third years under both the Lockheed Medical Benefits Plan, a traditional health care plan, and under health maintenance organization (HMO) plans. The parties also agreed to maximum weekly premiums of $15 for single coverage and $30 for family coverage for employees under the Lockheed Medical Benefits Plan and $10 and $25, respectively, for coverage for employees under HMO plans.

Other terms included a $5 increase in the monthly pension rate for both past and future service, bringing the rate to $35 per year of credited service; retention of overtime pay for weekend work and for work after 8 hours a day; and 37 paid holidays during the term of the agreement.

In a related development, Rockwell International and Locals 887, 962, 1519, and 1558 of the United Automobile Workers signed a 3-year master agreement covering almost 4,400 production and maintenance workers in California and Oklahoma.

The contract calls for annual lump-sum payments equal to 4 percent of an employee's earnings paid during the preceding 12 months; continuation of the COLA clause, which provides for quarterly payments equal to 1 cent an hour for each 0.3-point rise in the Consumer Price Index for Wage Earners and Clerical Workers, with the first 13 cents an hour being diverted to fund improved pension benefits; the roll-in to wages of $1.28 an hour in COLA payments earned during the prior contract; an additional $1.20 an hour in minimum rates for production and maintenance workers in labor grades 1-7; and 5-cent to 10-cent increases in the automatic progression/pay for knowledge after 2 years in the wage progression. At the expiration of the prior agreement, top-paid employees' wage rates ranged from $15.45 to $19.17 an hour.

The parties made several changes in health care coverage. They replaced the current indemnity plan with a new health network point-of-service plan and retained two of the five current HMO plans. Negotiators instituted a $100 monthly employee contribution for dependents who are eligible for health care under another employer's plan but do not enroll in that plan. They also would require future retirees to join the point-of-service plan or one of the HMO's, effective in January 1994; would eliminate dental and vision coverage for employees retiring after December 31, 1993; and would require employees who retire after December 31, 1993, to pay 50 percent of premium increases in excess of twice the premium costs of the indemnity plan.

Other major changes in benefits included a $3,000 increase, to $22,000, in life insurance benefits; a $6,000 boost, to $36,000, in supplemental, optional life insurance coverage; a $30 increase in the maximum accident and sickness benefit, to $305 a week; and a $3 increase in the monthly pension rate, to $32 for each year of credited service, effective in January 1994.

Negotiators agreed to combine various job classifications to increase flexibility and eliminate classification line restrictions. They also instituted a pay schedule based on knowledge rather than time in service for employees in new classifications with "stretch" rate ranges.

Bargainers expanded and enhanced the employee involvement program, which was introduced in the 1990-93 agreement. They would provide an "opportunity to agree" to modify or waive certain contract provisions, such as those relating to alternate work schedules and job classifications, that need to change to meet the challenges of a global marketplace. The parties also agreed to provide the resources to give employees the training and development opportunities they need to implement an effective employee involvement program.

Other terms introduce a family care provision, require management to discuss with the union its intention of subcontracting on-site maintenance work or off-site work currently performed by bargaining-unit employees, establish expedited grievance procedures, allow employees to take vacations in 4-hour increments, add the death of a great-grandparent of an employee or spouse to coverage under the bereavement pay provision, provide 36 holidays over the term of the contract, and permit the company to designate "no smoking" areas inside the plant and require the parties to jointly agree on "outside smoking" areas.

Elsewhere, members of Local 218 of the United Automobile Workers overwhelmingly ratified a 3-year contract with Bell Helicopter Textron, Inc. for about 2,600 production and maintenance workers in Fort Worth, TX. The major stumbling block to settlement centered on the company's proposals for health care cost-containment arrangements.

The pact calls for a $1,500 lump-sum bonus in the first year, lump-sum bonuses in the second and third years equal to 3 percent of an employee's earnings in the preceding 12 months, and continuation of the COLA clause which provides for quarterly payments equal to 1 cent an hour for each 0.3-point rise in the Consumer Price Index for Wage Earners and Clerical Workers. After the roll-in of $1.49 an hour in COLA payments earned during the prior contract, maximum base wage rates ranged between $16.26 and $19.87 an hour.

In the health care area, negotiators agreed to continue health insurance coverage without employee contributions to premiums. They introduced four HMO plans, with mandatory participation for employees in network areas; employees located outside network areas will be allowed to retain coverage under the current traditional indemnity health insurance plan.

The parties made several changes in dental coverage, effective in 1994. They increased the annual maximum benefits for both dental and orthodontic benefits by $250, to $1,500; imposed a $25 deductible for nonpreventative care dental expenses; increased the number of oral examinations and cleanings from two to three a year; and established a triennial dental sealant benefit for children ages 14 and younger.

Also effective in 1994, for those out of the network area, the contract would provide benefits with deductibles of $200 for single coverage and $400 for family coverage, a 70-percent reimbursement rate after satisfaction of the deductible, maximum out-of-pocket expenses of $1,500 for single coverage and $3,000 for family coverage, and a prescription drug program with employee copayments of $5 for generic brands and $10 for brand name drugs.

The parties made several changes in retirement benefits, including boosting monthly pension rates by $3 over the term of the contract, to $32 per year of credited service. They provided three separate windows of opportunity for employees age 58 or older with at least 20 years of service to retire at the $32 pension rate. Negotiators also agreed to give employees who retired before September 1993, or their surviving spouses, lump-sum payments of $400 in December of 1993, 1994, and 1995.

Other terms increased management's flexibility to assign work, including combining jobs and making temporary work assignments that cross job classification lines; boosted both life insurance and accidental death and dismemberment insurance benefits by $3,000, to $22,000-$24,000 each; provided 38 holidays during the term of the contract; and increased weekly accident and sickness benefits by $30 over the term, to $220-$240.

In another development, Lodge 91 of the International Association of Machinists agreed to a package of concessions to save some 2,300 jobs in Connecticut at Pratt & Whitney, a jet engine manufacturer hard hit by cuts in defense spending and by the faltering airline industry. The union represents about 10,000 workers at five Pratt & Whitney plants in the State.

The company, a division of United Technologies Corp., previously announced that it would close its East Hartford and Southington plants and substantially reduce the work force at its North Haven plant as part of a plan to eliminate 9,000 jobs in Connecticut by 1994. It said it was pursuing the plant closings and layoffs to position itself for a recovery in the commercial airline industry.

As part of the settlement to reduce manufacturing costs, Pratt & Whitney and the Machinists entered into a "Job Security, Productivity, and Cost Reduction Agreement." Under its terms, the company agreed to keep open its East Hartford, Middletown, North Haven, and Cheshire plants and close only the Southington plant. It also accepted a ban on moving work to its plants in Maine or Georgia and on subcontracting work to vendors except when (1) temporary assistance is needed to meet schedules, (2) specific skills or equipment needed for a job are not available within the company, (3) a product center fails to meet productivity goals, or (4) the work is placed outside the company as a result of a partnership, offsets, or joint ventures. Pratt & Whitney also agreed to a system of temporary and voluntary layoffs before implementing involuntary layoffs that push the work force below 7,000 jobs. To induce voluntary separations, bargainers would give departing employees normal severance pay, a special $5,000 lump-sum payment, and 6 months of free health care coverage for themselves and their dependents (12 months if the employee is eligible for a pension).

The union agreed to help devise productivity improvement plans and work methods to bring subcontracted work back to the plants; to change certain work rules, including eliminating overtime for work on Saturday and Sunday unless an employee's hours exceed 40 for the week; and to link future wage increases to productivity.

In the compensation area, Pratt & Whitney dropped its demand for an immediate $2 an hour wage cut. The Machinists agreed to forgo a 3-percent general wage increase scheduled for December 1993, cost-of-living adjustment payments due in 1993 and 1994, and automatic progression increases due during the term of the contract. The union also agreed to cuts in insurance coverage for current employees and future retirees and wage cuts ranging from 10 cents to $2 an hour if productivity goals are not met.
COPYRIGHT 1993 U.S. Bureau of Labor Statistics
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Title Annotation:labor contracts
Author:Cimini, Michael H.; Behrmann, Susan L.
Publication:Monthly Labor Review
Date:Sep 1, 1993
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