Boeing factory workers gather at a picket line near the entrance to a manufacturing facility on the first day of a strike in Renton, Washington, U.S., September 13, 2024.
Matt Mills McNight | Reuters
RENTON, Washington – Lack of money Boeing The ongoing strike by machinists fighting for higher wages is facing rising costs, and failure to reach an agreement could prove even more costly.
In the shadow of a factory outside Seattle where Boeing makes its best-selling planes, striking Boeing machinists told CNBC they had saved money and taken, or were considering, side jobs in landscaping, moving furniture or working in warehouses to make ends meet if the strike continued much longer.
The Boeing factory workers' walkout in the Pacific Northwest has just entered its second week. The financial cost of the strike to Boeing will depend on how long it lasts, but ratings agencies warn that the company could suffer a downgrade if the strike drags on too long.
This would further increase the company's borrowing costs, which are already $60 billion in debt. Boeing has already burned through about $8 billion this year following the near-catastrophic failure of a door latch on one of its 737 Max planes in January.
Boeing has not made an annual profit since 2018, and new CEO Kelly Ortberg is trying to restore the company's reputation after months of production crises that have led to deliveries to customers and drained the company of liquidity.
Boeing 737 Max aircraft parked at the airport in Renton, Washington.
Leslie Josephs | CNBC
At the local union office in Renton, machinists were preparing for what could be a long strike: union members were carrying in large pallets of water bottles while someone in the kitchen was mixing up a giant tuna salad to make sandwiches for the workers. Union vans were driving to demonstration sites around Renton and offering picket workers transportation to their bathroom breaks. Burn barrels were providing warmth to the freezing picket lines at night.
Many workers spoke of loving their jobs but worried about the high cost of living in the Seattle area, where most Boeing planes are manufactured.
The median home price in Washington state rose about 142% to $613,000 in 2023, up from $253,800 a decade earlier, according to the state's Office of Financial Management. That beats the national increase of about 55% during that period, according to data from the Federal Reserve Bank of St. Louis.
“We cannot afford [to own] a home,” said Jake Meyer, a Boeing mechanic who will work as a driver for a food delivery service during the strike and plans to take odd jobs like moving furniture. Meyer said that although he is striking for higher wages at Boeing, he enjoys working as an aircraft builder.
“I am proud of my work,” he said.
Another Boeing machinist said he saved for months, foregoing things like restaurants and paying three months' mortgage payments in advance.
“I can hold out as long as I need to,” said the worker, who spoke on condition of anonymity.
50 million dollars a day
More than 30,000 Boeing machinists walked off the job at midnight on Sept. 13 after rejecting a tentative labor agreement by nearly 95 percent of the vote — 96 percent favored a strike. They received their last paycheck on Thursday, and their health insurance expires Sept. 30. They will soon receive $250 a week from a union strike fund.
The strike is costing Boeing about $50 million a day, estimates Ron Epstein, an aviation analyst at Bank of America. The strike has halted production of most Boeing planes, and that's impacting the aerospace giant's vast network of suppliers, some of which have already been ordered to halt deliveries. Boeing is still producing 787 Dreamliners at its non-union plant in South Carolina.
Members of the Boeing Machinists union count their votes to accept or reject a proposed contract between Boeing and union leadership and decide whether or not to strike if the contract is rejected at the Aerospace Machinists Union Hall in Seattle, Washington, on September 12, 2024.
AFP | Getty Images
The fight pits Boeing against its workforce, which is demanding wage increases and other improvements. Boeing's latest offer included across-the-board wage increases of 25% over four years and was endorsed by the machinists' union, the International Association of Machinists and Aerospace Workers District 751.
The workers said they were demanding wage increases of around 40%, as proposed by the union, as well as annual bonuses and the restoration of pensions lost over a decade ago.
Boeing and the union sat at the bargaining table this week, but both Boeing and union negotiators expressed disappointment at the lack of progress.
“We continue to value the issues you identified in the recent survey,” union negotiators wrote to their members on Wednesday. “However, we are deeply concerned that the company has failed to address your most important concerns. No meaningful progress was made in today's talks.”
Ortberg, who has been in office for just six weeks, announced this week the temporary furlough of tens of thousands of Boeing employees, including managers and executives, on the heels of the announcement of a hiring freeze and other cost-cutting measures made this week.
“During mediation with the union this week, we continued our serious efforts to engage the union's bargaining committee in meaningful negotiations to address the feedback we received from our team,” Ortberg said in a note to employees Friday.
“While we are disappointed that the talks did not result in greater progress, we remain committed to reaching an agreement as quickly as possible that recognizes the hard work of our employees and ends the work stoppage in the Pacific Northwest,” Ortberg wrote.
The strike, which also includes Boeing machinists in the Seattle area, Oregon and several other locations, is just the latest in a series of labor disputes in recent years that have also involved actors, auto workers, longshoremen and airline employees, all of whom have won pay raises after striking or threatening to strike.
The Biden administration has encouraged Boeing and the union to reach an agreement.
“I think both parties want to come to a solution here, and I hope there is a solution that makes sense for workers and works for a company that really needs to find its way forward on so many fronts,” Transportation Secretary Pete Buttigieg told CNBC's “Squawk Box” on Thursday.
Tight labor market
Boeing is facing a tight labor market. During the last strike in 2008, which lasted less than two months, the company was in a better financial position and there was less competition for jobs in the region.
A Boeing supplier told CNBC that furloughing or laying off employees would cause problems months later because it takes so long to train employees on such technical and detailed tasks.
Boeing and its suppliers laid off thousands of workers during the pandemic and have since struggled to hire and train new workers in time to cope with the rebound in air traffic and rising demand for aircraft.
“We're in an environment where it's hard to find skilled, technical workers right now, particularly in aerospace and defense,” said Bank of America's Epstein. “So what do you do to not only retain them but attract them? If they really want a pension, maybe that gives you a competitive advantage over people trying to recruit talent.”
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