Boeing eager to return to union talks as strike shuts factories
By Joe Brock and David Shepardson
SEATTLE (Reuters) -Boeing's U.S. West Coast factory workers walked off the job on Friday after overwhelmingly rejecting a contract deal, halting production of the planemaker's strongest-selling model and sending shares down over 2%.
The first strike since 2008 comes as the planemaker is under heavy scrutiny from U.S. regulators and customers after a door panel blew off a 737 MAX jet mid-air in January.
The mounting crises hit Boeing (NYSE:BA )'s stock and sparked a leadership upheaval. The shares fell 2.1% in the early morning trading session. The stock has lost nearly 38% so far this year, losing $58 billion in market value.
Shares in Spirit Aerosystems, the supplier Boeing is buying, fell 0.6%.
New CEO Kelly Ortberg was brought in just weeks ago to restore faith in the planemaker and proposed a deal including a pay rise of 25% over four years, far lower than the 40% workers had demanded.
Roughly 30,000 International Association of Machinists and Aerospace Workers (IAM) members who produce Boeing's top selling 737 MAX and other jets in the Seattle and Portland areas voted on their first full contract in 16 years, with 94.6% rejecting it and 96% favoring a strike in a two-part ballot.
"This is about fighting for our future," said Jon Holden, who headed the negotiations for Boeing's largest union, before announcing the vote result on Thursday evening. The union will get back to the table as quickly as it can, Holden told reporters, without saying how long he thought the strike would last or when talks would resume.
Boeing said it was ready to get back to the negotiating table, a sign that it could sweeten the deal.
"The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members. We remain committed to resetting our relationship with our employees and the union," the planemaker said in a statement.
Boeing had said it had offered workers everything it could and needs to plan for the investments needed to replace its best-selling single-aisle models while placating striking workers.
A long strike could badly hit Boeing's finances, already groaning due to a $60-billion debt pile. To cover debt maturities, Boeing needs to generate enough cash flow.
Bank of America said Boeing would likely have to move closer to IAM's initial wage proposal.
BOEING'S CHALLENGES
The proposed deal included a $3,000 signing bonus and a pledge to build Boeing's next commercial jet in the Seattle area, provided the program was launched within the contract term.
Data from equity research firm Melius Research showed median employee compensation for the aerospace and defense firms companies it monitors grew 12% between 2018 and 2023. It fell 6% for Boeing and 19% for Spirit Aerosystems.
Although IAM leadership recommended last Sunday that its members accept the contract, many workers responded angrily, arguing for the original demand and an annual bonus.
STRIKE!
Workers have been protesting all week in Boeing factories in the Seattle area that assemble Boeing's MAX, 777 and 767 jets.
On Friday, members in the union hall cheered and chanted "Strike! Strike! Strike!" and shortly after midnight, striking workers started to gather outside Boeing factories in the Seattle area. Many waved placards that read: ‘On Strike Against Boeing', and drivers honked horns in support.
“I’m willing to strike for two months or even longer. Let’s go as long as it takes to get what we deserve,” said James Mann, a 26-year-old who works in a wings division.
The Biden administration was in touch with both sides, White House press secretary Karine Jean Pierre said on Thursday. "We are going to encourage both parties to negotiate in that way, in good faith and reaching a strong contract," she said.
A prolonged strike would weigh on airlines that depend on Boeing jets and suppliers that manufacture parts and components.
JPMorgan said Boeing could adjust the pace at which it takes material. "At a minimum, a prolonged strike could affect supplier growth expectations," said analyst Seth M. Seifman.
Boeing workers' last strike in 2008 shuttered plants for nearly two months and hit revenue by an estimated $100 million per day. According to TD Cowen, a 50-day strike could cost Boeing $3 billion to $3.5 billion of cash flow.
CFM, the sole-source engine supplier for the 737 MAX, said there was no immediate impact to its operations.
Southwest Airlines (NYSE:LUV ) said it remains in close communications with Boeing, adding earlier this year it took steps to address potential deliveries disruptions.
Cathay Pacific and flydubai said they were in touch with Boeing. A flydubai spokesperson said the airline was looking forward to Boeing swiftly resolving the issue.
S&P Global Ratings said that an extended strike could hurt its overall rating. Both S&P and Moody's (NYSE:MCO ) rate Boeing one notch above junk status.
Source: Investing.com
