BOEING’S shares rose after union leaders endorsed the latest offer to boost wages, spurring optimism that the company could finally be close to ending a lengthy strike that’s crippling its jetliner manufacturing.
The planemaker’s fourth proposal for a four-year contract would raise pay by 38 per cent, give hourly workers a US$12,000 signing bonus upon ratification and boost contributions to retirement savings plans. It would not restore pensions, a point of contention for some veteran employees.
Leaders of the International Association of Machinists (IAM) and Aerospace Workers urged 33,000 striking members to approve the pact, which will be put to a vote on Nov 4. And they offered a blunt warning: Holding out for more would risk losing gains made through weeks of collective bargaining.
“In every negotiation and strike, there is a point where we have extracted everything that we can in bargaining and by withholding our labour,” the union said late Thursday (Oct 31). “We are at that point now and risk a regressive or lesser offer in the future.”
The terms should be enough to win a majority of votes needed to ratify the new contract, RBC Capital Markets analyst Ken Herbert said in a client note on Friday, citing conversations he had with IAM members staffing Seattle-area picket lines earlier this week. The strike is also squeezing Boeing’s suppliers, risking Boeing’s eventual recovery the longer it goes on, he said.
Although lingering frustration among workers may make it a close vote, RBC sees “enough of a growing sentiment looking to return to work that the agreement will get approved”, Herbert said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Boeing’s stock rose as much as 4.5 per cent in New York on Friday. The shares had plunged 43 per cent this year to Thursday’s close, the second-worst performance in the Dow Jones Industrial Average.
Ending the strike that’s entering its eighth week would represent a critical win for new chief executive officer Kelly Ortberg, clearing the way to move forward with plans to rebuild Boeing’s culture and improve the quality of work in its factories. Union leaders had remained neutral on the company’s third contract offer, which was rejected by 64 per cent of IAM District 751 members who voted.
On Monday, the company shored up its balance sheet by raising more than US$20 billion in capital to fund its recovery. Now, Ortberg’s team and union negotiators have made progress towards addressing another pressing crisis with assistance from acting US Labor Secretary Julie Su, who’s played a role in ending other strikes.
“Collective bargaining works, and there is no better example of that than when workers at the bargaining table get an unprecedented offer,” Su said.
Last year, Su helped facilitate deals between Kaiser Permanente and thousands of its healthcare workers, as well as West Coast dockworkers and port operators. More recently, she and others in the Biden administration stepped in to help end a days-long strike that shut East and Gulf Coast ports.
The cost to Boeing of resolving the work stoppage is far outweighed by the damage it’s done to the planemaker, its suppliers and the US economy. Analyst Sheila Kahyaoglu estimates the company would face around US$1.1 billion in higher salary costs over four years if the deal is approved.
Production of the cash-cow 737 Max and other jetliners has been shut down since workers walked off the job on Sep 13, idling Boeing’s IAM-represented plants across the West Coast. Instead of generating cash in the fourth quarter, the company now expects to burn through around US$4 billion, which would bring total outflows for the year to US$14 billion.
The strike has also caused an estimated US$9.66 billion in total economic losses, far outweighing the early October walkout by dockworkers, according to the Anderson Economic Group. The tally includes lost wages, lost earnings, supplier losses, customer impact and fallout to the local economy in Washington and Oregon.
The IAM strike is driven by resentment over the terms of a controversial 2014 agreement that curbed pay and eliminated pensions for new employees at a time when senior executives were richly rewarded.
The latest offer does not reinstate the Machinists’ defined benefit pension plans, a key demand for older workers. But it helps workers build their retirement savings and recoup losses from the years when their wage increases did not keep pace with inflation.
Boeing’s 38 per cent wage increase would include a 13 per cent bump in the first year. In all, it compounds to a 44 per cent increase over the span of the four-year contract, the union said.
The agreement includes a guaranteed 4 per cent annual bonus for workers. The US$12,000 bonus if the deal is approved is up from the company’s initial US$3,000 sweetener.
“The proposal’s economics are a material improvement for labour,” said Dino Kritikos, a managing director with Fitch Ratings. “A labour deal, in conjunction with the most recent equity raise, would help Boeing and its stakeholders turn their near-term focus solely on operational execution.” BLOOMBERG
