Boeing union rejects tentative contract, goes on strike
In a significant development, over 30,000 members of the International Association of Machinists and Aerospace Workers (IAM) have initiated a strike against Boeing. This action follows their overwhelming rejection of a proposed contract from the aircraft manufacturer. The strike is expected to disrupt airplane assembly at Boeing's factories in Seattle, Portland (Oregon), and southern California. This marks IAM's first strike since 2008.
Dissatisfied with Boeing's contract offer
The proposed contract, which was rejected by 94.6% of the machinists and led to a strike vote by 96%, had been tentatively agreed upon after months of negotiations. IAM 751 Union President Jon Holden had endorsed the agreement, stating that they couldn't guarantee achieving more through a strike. However, many union members expressed dissatisfaction with the proposal, arguing that it did not meet their expectations.
Union was hoping for 40% raise and more significant changes
Boeing's contract offer included a 25% wage increase, reduced healthcare costs for employees, and enhanced retirement contributions. The company also pledged to construct its next airplane in the Pacific Northwest facilities instead of its non-unionized South Carolina plant. Despite these provisions, the union members were dissatisfied as they had been hoping for a 40% raise and more significant changes to their pensions.
Strike poses challenges for Boeing amid safety crisis
The strike comes at a challenging time for Boeing, which is already dealing with a safety crisis following an incident where a door plug panel detached from a 737 Max jet midair in January. This event has forced the company to slow down production of its best-selling plane as it works on improving quality control across its factories and supply chain.
Company's response to strike and potential financial impact
In response to the strike, Boeing stated that it was clear that the tentative agreement with IAM leadership was not acceptable to the members. The company expressed its commitment to resetting its relationship with its employees and the union, and readiness to return to negotiations for a new agreement. According to TD Cowen, if this strike lasts for 50 days like in 2008, it could potentially cost Boeing an estimated $3 billion-$3.5 billion of cash flow.
Impact on stock and future challenges
Boeing's stock has experienced a decline of 36% this year due to concerns over safety, production, and a $60 billion debt burden. The strike presents multiple challenges for Boeing as it needs to decide its next move at the bargaining table while ensuring the security of factories filled with partially built planes without union workers.
