The Pentagon has wrestled with Congress for years to cancel the C-17 military-transport jet program, but it could be a production-line strike at the Boeing Co. facility where the giant planes are built that will finally kill it.
"The real rub is the life of the program," said Wayne Plucker, an aerospace analyst with the research firm Frost & Sullivan.
"While both the union and Boeing talk about the potential for more sales to keep the line open, this may effectively seal its fate.... The defenders of the program in Congress have pretty well spent their chips on past rescues of the program."
The 1,700 assembly-line workers at the Long Beach, Calif., plant walked picket lines for a second day Wednesday, demanding better pension and medical benefits. Talks between management and the UAW broke down last week after employees rejected a 46-month contract offer from the company.
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Boeing builds 16 C-17s a year, primarily for the U.S. Air Force, with a price tag of about $200 million each. But orders have been declining for the pricey jet, and the company recently said it would lower its annual production rate to 10 by mid-2011.
The U.S. military has sought to end the program and instead upgrade its aging Lockheed Martin Corp. C-5 Galaxy fleet at a fraction of the cost. It also wants to buy more C-130 Hercules planes, a smaller transport aircraft that has proved versatile in wars in the Middle East.
Multiple studies have shown the military has ample airlift capacity to meet current and future needs, Defense Secretary Robert Gates said in a speech Saturday at the Eisenhower Presidential Library in Abilene.
"The leadership of the Air Force is clear: They do not need and cannot afford more C-17s," Gates said. Yet Congress is fighting to keep it in the defense budget "at an unnecessary potential cost to the taxpayers of billions of dollars over the next few years," he said.
Congress' main concern are the high-paying jobs such aerospace programs create, but the strike among C-17 workers isn't going to strengthen the lawmakers' argument, according to Lawrence Korb, a defense analyst with the Center of American Progress, and a former assistant secretary of defense under President Reagan.
"The Pentagon had a lot of leverage (with Congress) to begin with because Gates has talked about getting the president to veto it," Korb said. With the budget deficit and more pressing needs in the defense budget, there are going to be cuts, he said.
The Defense Department seeks to end its acquisition of C-17 jet in the proposed 2011 budget. The loss of U.S. funding would likely kill the program, analysts have said.
Of Boeing's current backlog of 36 orders for C-17s, just seven are for foreign customers, though India may soon buy 10 more.
Boeing has worried since at least 2006 that it may have to end the C-17 line, but its allies in Congress have so far been able to insert new orders into the defense budget.
It's a costly operation, according to Plucker, and it's sitting on some pricey real estate. It may be that Boeing and the union expect the plant to be closed in the near future and are seeking out a "best financial fit."
"The offer from Boeing is actually fairly generous for a program in its twilight years," he said. "The union is holding out for more since it would make a noticeable difference in the severance packages and pensions if the plant were closed."
The latest offer to C-17 workers included an increase in wage and pension benefits, but also called for greater employee contribution to health care coverage by 2014.
Employees rejected that and halted production. In total, the California facility employs about 5,000 people.
Like the rest of the manufacturing industry, Boeing has seen increasing costs due to health care expenses and has been trying to get employees to pay more. A 2008 strike among commercial aircraft machinists also hinged on worker health care contributions.
Sales for the C-17 in 2009 were around $3 billion, or nearly 10 percent of Boeing's defense, space and security business revenue of $33.66 billion, which is about half of the company's total revenue.