Image Courtesy of Boeing

MIAMI — Workers at Boeing’s 787 Dreamliner plant in South Carolina (Boeing South Carolina or BSC) have rejected a unionization bid from the International Association of Machinists’ (IAM). Boeing won overwhelming support from BSC workers, with a whopping 74.2% of the 2,828 participants (representing ~94% participation) voting in support of the company to keep the IAM off property.

“We will continue to move forward as one team,” said Joan Robinson-Berry, vice president and general manager of BSC. “We have a bright future ahead of us and we’re eager to focus on the accomplishments of this great team and to developing new opportunities.

The rejection of the unionization drive partially validates one of the primary drivers behind Boeing’s placement of a plant in South Carolina. The plant, which broke ground in 2009 after a rapid negotiating process during the depths of the global financial crisis, marked the first time that Boeing had voluntarily branched out from its historical commercial aircraft manufacturing base in the Seattle metropolitan area (the carrier had added manufacturing facilities around the country including in St. Louis and Long Beach through its merger with McDonnell Douglas).

One key driver behind the decision to diversify the 787’s production (and Boeing’s commercial aircraft production capabilities more broadly) was the Boeing machinists strike of 2008, which affected 27,000 machinists and lasted roughly 8 weeks, costing the company $100 million per day or roughly $5.6 billion in all (and more than a billion in net profits).

This followed on from an earlier strike in 2005 that also cost the company close to a billion dollars all in and was part of a broader pattern of labor activism amongst Boeing employees in the Pacific Northwest (PNW). Placing a plant in a different, lower-cost region with less union-friendly rules was one of the key drivers behind Boeing’s move to place a plant in Charleston.

In addition to serving as a hedge against further union action, Boeing’s new plant also gave it an implicit hedge against a worsening business climate (regulations or taxes) in the Pacific Northwest, which it used to extract tax breaks worth billions of dollars from Washington in return for keeping 777X production in the state.

The effectiveness of Boeing’s hedge against its PNW workforce would have been blunted with a union vote in South Carolina. However, it is unclear whether South Carolina’s status as a so-called right-to-work state adversely impacted the IAM’s sales pitch. Under right-to-work laws in place in South Carolina and in 27 other states around the country, new employees in union workplaces can opt out of joining the union and out of paying any union dues.

Right-to-work states tend to blunt the benefits of union membership for interested workers due to the free rider problem and a lack of strength in numbers (non-union employees don’t have to participate in a strike), and this may have potentially convinced otherwise interested employees that a union wouldn’t provide a large benefit. Moreover, it is important to note that South Carolina is politically and culturally less friendly to unions than much of the rest of the United States.

With the unionization hurdle now cleared, attention at BSC will now turn to the roll out of the Boeing 787-10 this Friday. The 787-10 will be the last (and largest) of three 787 Dreamliner variants to enter service and is expected to have its first flight later this year.