'Partners in prosperity'

$6 million cost savings shared by employees in UAW 148 and the company

In 2003, Boeing hourly employees represented by United Auto Workers (UAW), Local 148 in Long Beach, Calif., generated more than $6 million in cost savings through their hard work and dedication in building C-17s and 717s. These savings were shared between those employees and Boeing.

As an incentive for employees to cut costs, the company and union agreed to share the cost savings through the Gainsharing program. Cost savings were defined as any process or product improvements that result in a reduction in manufacturing costs. The program also underscores Boeing's commitment to employee involvement.

"Gainsharing is a joint UAW-Boeing performance-based 'incentive pay' plan (defined in the collective bargaining agreement), created to share in the reduction of production's variable cost," said Frank Lee, Boeing Gainsharing coordinator—Long Beach. "This initiative embraces the concept that cost reductions will be shared between Boeing and the employees represented by the UAW 148."

Created in 1996, the program is based on a jointly approved set of measurements, with the cost reduction savings calculated annually. In 2003, the employees represented by UAW 148 earned $3 million of the total savings—with an average individual payout of more than $1,050.

Financial gains under this program are calculated by comparing the actual savings to the targeted costs for each of the following metrics:

• Direct Labor—the hours used by UAW-represented employees working directly on the aircraft.
• Indirect Labor—the number of UAW employees supporting those employees directly working on the aircraft.
• Employee-Influenced Material Cost—based on the material dollar accounts for "operating supplies" (abrasives, gloves, earplugs, safety glasses, etc.) and "portable and perishable tools" (drill bits, drill motors, rivet guns, etc.).

Gainsharing posters showing these metrics are updated monthly and displayed throughout the plants.

"From their willingness to base some of their pay on improvements in their performance, these employees have reaped the rewards," Lee said. "Our Gainsharing program helps us realize our motto of 'Partners in prosperity.'"

Other unions in St. Louis and Philadelphia have similar programs that also reward employee involvement. Union-represented employees at both these sites have shared in cost savings averaging close to $1,000 a year.

The opportunity to earn more through variable pay programs is expanding to union-represented employees across the company. The recent agreement between the company and the Wichita (Kan.) Technical and Professional Unit (WTPU) includes provisions for the joint development of a new incentive program with a goal of having that program in place in 2005.