Re: “Long-term job security drives Boeing workers to strike” (Richard S. Davis Viewpoint, 9-14).

Davis has swallowed Boeing management’s arguments about costs along with the economic clichés that are the current gospel in business. Thus, the Boeing offer coupled with its long-term plans to outsource much of the remaining work are the keys to remaining productive and competitive.

In effect, Davis tells the workers to take what they are offered. Long-term job security is to be achieved via outsourcing. None of these generalities holds up to examination.

Less than 15 percent of Boeing’s costs are labor, and that includes many people who are not involved in touch work – i.e. making, moving and assembling parts into aircraft along with the engineering design of the aircraft, its maintenance, the manufacturing processes and quality standards. Such actual productive labor is much less than 15 percent.

The biggest cost is “overhead.” Back in 1997, it was charged at 490 percent of direct labor and growing. It is always growing.

Over the last 25 years, Boeing has had a stream of management initiatives intended to improve efficiency. All shared two characteristics.

 • “We do it to them” – “them” being direct labor in manufacturing or engineering. “We are OK, and they are the problem.”

 • No matter what the initiative, it always increased the ratio of chiefs to Indians. That’s overhead growing. By the way, the automotive companies are no better in that respect.

What is overhead? For the most part, it is the cost of distrust. Because the company does not trust its employees, it builds many layers of supervision and management to control. Since nonunion employees are “totemed,” all remain fearful about their job security. Since there can never be enough control, layers of management are piled on.

Some of that overhead is the cost of maintaining 147 metrics of performance in just the 737 manufacturing operation. Overhead keeps growing, justified by the need to control costs, even when the costs of control exceed any plausible estimates of the benefits of control. Thus, for every dollar in wages, there are five more to administer their work.

Davis claims that outsourcing is a necessary component of Boeing’s strategy to remain competitive and not just the current fad from Wall Street. Let’s look at that more carefully.

Why is Airbus a competitor? The Boeing answer is because it was subsidized by the European governments, thus allowing it to cut prices.

That is the wrong answer. Airbus was certainly subsidized, but not to cut prices. The European governments made very clear that they wanted to preserve those high-tech jobs for European workers.

What was Boeing’s response? Ron Woodward laid off 22,000 workers followed by Alan Mullaly laying off an additional 10,000 among a continuing stream of smaller layoffs. So Boeing’s answer to Airbus was to eliminate thousands of years of competitive advantage encoded in the skills and talents of its workers.

When there was the dramatic turnaround in 1996, it was estimated that the average experience level of the 737 assembly workers went from 10 years to three years as employees moved up to better jobs that they had to learn. The aircraft may be commoditized but the skills required to build a quality, safe and beautiful bird are complex and only mastered with years of experience.

Boeing claims that outsourcing will keep it competitive, that it wants to get out of making parts and reduce assembly work by outsourcing. It is a great system integrator and that will be its long-term strategic competitive advantage. So it outsources more and more of its engineering and manufacturing work.

What is a company that is only a systems integrating company? Basically, it is an all-overhead company. What value is it adding that China, Japan, and India cannot readily duplicate? It is hard to imagine a more dysfunctional long-term strategy or one better designed to reduce Boeing’s competitive advantage. It is literally training and tooling its competition.

So, we, as a community, should support the Boeing strikers. They are defending the jobs that sustain a major part of our state economy, and they are defending the long-term competitive advantage of Boeing for the benefit of shareholders and our community.

The skills being displaced and destroyed by outsourcing are crucial to our ability to defend our country. Enough outsourcing and the Air Force will have to go overseas for its prototypes and airplanes.

Eli Berniker of Puyallup is a professor of business at Pacific Lutheran University.