Boeing’s Retiring Boomers Underscore U.S. Manufacturing Plight

(Bloomberg) -- John Rothery said his goodbyes, handed in his badge and walked away from Boeing Co. He had worked on almost every commercial jet model over four decades, from a 707 bristling with military radar in the late 1970s to today's sleek 787 Dreamliner.

The date, Oct. 3, had been circled on Rothery's calendar for more than a year. It was the last time that Boeing would bump up pension pay for Seattle-area factory workers before it froze the plan at month's end, provisions dictated by a deeply unpopular 2014 contract extension. For Rothery, it was the final straw.

“I'll be 64 in November. After 37 years, that's enough,” said Rothery, a tool-and-die maker. “I was working just to build a pension. As of Oct. 31, there's no pension. Why stay?”

The benefit change could hasten a generational shift as Boeing's baby boomers retire, a trend that's also looming for other U.S. manufacturers. The planemaker's most experienced workers are packing up their tools during critical upgrades of its two largest profit-drivers: the 737 and 777 jetliners. About 10,000 mechanics are eligible to retire from the company's Puget Sound manufacturing base alone, and no one knows how many are poised to leave.

“It's a conversation that anyone who is close to retirement is having,” said Becky Beasley, 75, a grandmother and body-structures mechanic who helps rivet together hulking aluminum panels to form the 777's hull.

Boeing is well aware of the risks: Shortages of skilled workers from a smaller, mid-1990s exodus contributed to a factory meltdown that halted production of its cash cow, the 737. So earlier this year, the manufacturer carefully structured a voluntary layoff aimed at retirement-age workers, staggering the departures of 1,057 machinists to avoid massive disruptions.

“We had that very much in mind,” said Joelle Denney, vice president for human resources at Boeing's commercial airplane division, of the 1995 tumult. As the date approached when pension benefits would stop accruing, workers had been leaving in a steady stream. 

“We're not expecting a big bubble or wave,” Denney said.

Skilled Workers

While Donald Trump and Hillary Clinton argue over the impact of international trade on factory jobs, U.S. manufacturers are grappling with a looming shortage of skilled workers. Almost 3.5 million manufacturing positions will need to be filled over the next decade as baby boomers retire, and 2 million of those jobs could remain vacant because of manufacturing's fading appeal to millennials, according to a 2015 study by Deloitte and the Manufacturing Institute.

The dilemma could be especially acute for Boeing, where about 35 percent of the 29,645 machinists in the company's Seattle industrial hub are 55 or older. By contrast, only 23 percent of the 15.3 million Americans working in manufacturing are in that age group, according to the U.S. Bureau of Labor Statistics.

Educational Training

For the long haul, the planemaker is investing in education -- from vocational training to programs at middle schools -- to try to make manufacturing “cool” to a generation that has never known shop class, Denney said. In the short term, Boeing is stepping up training and mentoring programs within its factories, she said.

Some question whether the company is doing enough.

“I do think that if people decide to leave en masse, that they cannot replace that workforce,” said Jon Holden, president of the International Association of Machinists and Aerospace Workers, District 751. “There's not enough in the pipeline to replace them.”

Memories are still vivid of the cascading production issues two decades ago after Boeing offered a one-time retirement incentive with few restrictions. More than 3,700 mechanics, engineers and technical workers cashed out in June and July 1995 alone, creating immediate shortages in some positions.

Many later were rehired as contractors as Boeing's factories struggled to keep pace with a sales spurt. The shortfall contributed to production meltdowns in 1997 that forced the manufacturer to temporarily halt its 747 and 737 assembly lines to catch up. The cost to Boeing: a $1.6 billion pretax accounting loss.

Voluntary Program

This year, Boeing closely managed who participated in the voluntary layoff offer, methodically planning for their replacement and charting when they left the company, Denney said. The measure targeted employees and managers on the cusp of retirement by offering as many as 26 weeks of pay and accelerated retirement benefits.

Boeing is trying to make its operations more efficient as it trims spending and automates more production amid cut-throat competition for slowing aircraft sales. The company has eliminated 4,853 jobs in the state of Washington since the end of January, a 6.2 percent reduction.

But while Boeing can control who leaves through the voluntary layoff, anyone can retire. That raises a risk of critical shortages of skilled tradesman with an intuitive feel for fabricating and assembling airplanes -- among the most complicated machines on the planet.

“The tricky aspect for the executives is not to lose too many skilled positions too quickly,” said Leon Grunberg, a sociologist and co-author of “Emerging from Turbulence: Boeing and the American Workplace Today.” “Can Boeing minimize the risk of losing the tribal knowledge?”

Nest Egg

Those leaving now will receive monthly pension payments of $95 for each year of employment. That amounts to about $34,200 annually for a 30-year Boeing veteran. While that covers basic necessities, retirees will also need savings to maintain their lifestyles, another factor that makes it difficult to predict near-term attrition.

Beasley, the body-structures mechanic, doesn't have a sufficiently large nest egg after 18 years at Boeing. She's also putting a grandson through law school.

“I'm a little concerned about my financial stability when I leave,” she said. “Social Security would barely cover the house payments.”

Rothery, the newly retired tool-and-die maker, is looking forward to golf, soccer and road trips in a motor home after wrapping up his career at Boeing's Frederickson, Washington, plant. His future is secure: 401(k) plan accounts of $750,000 or more aren't unusual for career workers who saved carefully, Rothery said.

He takes satisfaction from training his successor to step in seamlessly, but frets that his transition may be the exception.

“It's the vast amount of experience that's leaving,” Rothery said. “They will work around it. They'll still accomplish the task at hand. At what expense, it's hard to say.”

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net. To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Mark Schoifet, Tony Robinson