Workers with strike signs outside the Boeing Co. manufacturing facility during a strike in Everett, Washington, U.S., on Friday, Sept. 13, 2024.
M. Scott Brauer | Bloomberg |
BoeingFactory workers went on strike after midnight Friday, halting production of the company's best-selling aircraft, after the workforce overwhelmingly rejected a new labor contract.
This is a costly development for the manufacturer, who has struggled to ramp up production and restore its reputation following safety crises.
Workers in the Seattle area and in Oregon voted 94.6 percent against a tentative agreement presented by Boeing and the International Association of Machinists and Aerospace Workers on Sunday. Ninety-six percent of workers voted in favor of a strike, far more than the two-thirds majority required for a work stoppage.
“We're striking at midnight,” Jon Holden, president of IAM District 751, said at a press conference announcing the vote's outcome to cheers from the machinists. He called the strike an “unfair labor practices strike” and claimed that the factory workers were “discriminated against, coerced, illegally monitored and wrongfully promised benefits.”
Union members cheer during a press conference following the vote count on the union contract at the main union hall of IAM District 751 in Seattle, Washington, USA, Thursday, September 12, 2024.
M. Scott Brauer | Bloomberg |
He said Boeing had to negotiate in good faith. Boeing did not comment on his claims.
Boeing Chief Financial Officer Brian West said at an investor conference on Friday that the company's management was disappointed by the rejection and the strike. But he said they wanted to return to the bargaining table to negotiate a new deal “that is good for our employees, their families and our community, and that is exactly our intention.”
“There was a discrepancy,” West said at the Morgan Stanley event, warning that the strike would impact aircraft deliveries and production. He declined to provide specific estimates of the financial impact, saying the impact of the strike would depend on how long it lasted.
“Our immediate focus is to laser-like focus on cash-saving measures and that is what we will do,” he added.
Rating agencies Moody's and Fitch warned Boeing that the company could face a downgrade due to a lengthy strike, causing the company's share price to fall nearly four percent on Friday.
The preliminary proposal included a 25 percent wage increase over four years and further improvements in health and pension insurance, although the union had actually demanded an increase of around 40 percent. Workers had complained about the contract because it did not cover the increased cost of living.
The vote is a blow to CEO Kelly Ortberg, who has been in office for five weeks. The day before the vote, he had urged workers to accept the collective agreement and not to strike, saying that doing so would jeopardize the company's recovery.
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Under the tentative agreement, Boeing had promised to build its next commercial jet in the Seattle area to win over workers after the company moved production of the 787 Dreamliner to a non-union factory in South Carolina.
If the contract had been approved, it would have been the first fully negotiated collective agreement for Boeing engineers in 16 years. Boeing workers went on strike for nearly two months in 2008.
Sheila Kahyaoglu, an aviation analyst at Jefferies, estimated that a strike could cost Boeing $1.5 billion in financial damage within 30 days, saying it “could destabilize suppliers and supply chains.” She predicted that the tentative agreement, if approved, would have an annual impact of $900 million.
A worker holds a sign opposing the proposed contract as Boeing factory workers line up to vote on their first full contract in 16 years at the International Association of Machinists and Aerospace Workers District 751 union hall in Renton, Washington, U.S., September 12, 2024.
David Ryder | Reuters
Stephanie Pope, CEO of Boeing's commercial aircraft division, told machinists earlier this week that the preliminary deal was the “best contract we've ever put forward.”
“In previous negotiations, the view was that we should hold back a little so that we could ratify the treaty in a second vote,” she said on Tuesday. “We talked about that strategy this time, but we deliberately chose a new path.”
Boeing has burned through about $8 billion so far this year and is increasingly in debt. Production has fallen short of expectations as the company works to iron out manufacturing deficiencies and faces other industry-wide problems such as supplier and labor shortages.
Delays in Boeing aircraft deliveries have angered airlines, which have had to revise their hiring and growth plans in response. Southwest Airlineswhich only owns Boeing aircraft, has already significantly lowered its expectations for Boeing deliveries this year.
“As a result, we currently have the fleet we need to meet our upcoming flight schedules,” a spokesman said on Friday. The airline's management was in contact with Boeing before the vote.
Union members build burn barrels at the IAM District 751 headquarters union building as union contract votes are counted in Seattle, Washington, USA, on Thursday, September 12, 2024.
M. Scott Brauer | Bloomberg |
A burst door plug on a nearly new Boeing 737 Max 9 earlier this year has led to increased federal scrutiny of Boeing's production lines.
“Our aggressive monitoring of Boeing continues,” the Federal Aviation Administration (FAA) said on Friday. A spokeswoman for the agency said its inspectors would remain on-site at Boeing's factories during the strike.
White House press secretary Karine Jean-Pierre said at a press conference on Friday that the Biden administration is in contact with the two parties and encouraged Boeing and the union to negotiate in good faith to find “a solution here for all parties involved.”
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