Boeing Machinists Reject Labor Deal, Extend Strike
Boeing machinists have voted against a new labor contract, resulting in an extended strike that has now lasted over five weeks and severely impacted aircraft production, primarily in the Seattle area. The decision to reject the deal, which included a proposed 35% wage increase over four years, came from 64% of the union members, marking a significant setback for the aerospace giant.
The International Association of Machinists and Aerospace Workers union reported that the contract needed only a simple majority to pass. The rejection is particularly troubling for Boeing, which earlier this week warned that it would continue to experience substantial cash burn through 2025. The company also reported a staggering $6 billion quarterly loss, the largest since 2020, further complicating its financial outlook.
According to S&P Global Ratings, the ongoing strike is costing Boeing approximately $1 billion a month, putting its investment-grade credit rating in jeopardy and potentially raising borrowing costs just as the company seeks to stabilize its finances. New CEO Kelly Ortberg identified reaching an agreement with the machinists as a top priority, emphasizing the need to restore operational stability and address the company’s recent safety and quality issues.
“My focus is getting everybody looking forward, getting them back to work, and improving that relationship,” Ortberg stated in a recent interview with CNBC’s “Squawk on the Street.” He laid out a vision for Boeing’s future that includes potential downsizing to focus on core operations. Earlier this month, he announced plans to cut 10% of Boeing’s global workforce, which currently stands at 170,000 employees.
The strike began on September 13, when over 32,000 machinists across the Puget Sound area, Oregon, and other locations walked off the job after overwhelmingly rejecting a prior tentative agreement that proposed a 25% pay increase. The union had initially sought a 40% wage hike, highlighting the rising cost of living in the Puget Sound region.
The latest proposal, unveiled just last Saturday, included a 35% wage increase, enhanced 401(k) contributions, a $7,000 bonus, and other improvements. However, workers expressed dissatisfaction over the absence of a pension plan, which they had lost in a previous contract signed in 2014. “The rejection raises the risk of a protracted strike if the obstacle is reinstatement of a pension,” noted Ben Tsocanos, aerospace director at S&P Global Ratings. He indicated that Boeing is unlikely to agree to such terms due to associated costs.
Additionally, the new contract would require Boeing to build its next aircraft in the Pacific Northwest, addressing a key concern among unionized workers following the relocation of 787 Dreamliner production to a non-union factory in South Carolina.
Jon Holden, president of IAM District 751, expressed the union’s commitment to returning to the negotiating table, stating, “We have made tremendous gains in this agreement. However, we have not achieved enough to meet our members’ demands.”
Boeing declined to comment on the voting results. The ongoing labor strife compounds existing challenges for Boeing, which has faced scrutiny following incidents like a door plug blowing out midair on a Boeing 737 Max 9 earlier this year.
As the strike continues, it poses significant challenges for the fragile aerospace supply chain, which is still recovering from pandemic disruptions. Spirit AeroSystems recently announced it would temporarily furlough around 700 workers, warning that further layoffs or furloughs may follow if the machinists’ strike persists.
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Sources: AirGuide Business airguide.info, bing.com, cnbc.com