Boeing Machinists union members picket outside a Boeing factory on September 13, 2024 in Renton, Washington.
Stephen Brashear | Getty Images
It has been just over a month since greater than 30,000 Boeing machinists walked off the job after overwhelmingly voting down a tentative contract. Costs and tensions have only risen since then.
The strike is adding to pressure on Boeing’s latest CEO, Kelly Ortberg, who was brought in over the summer to resolve the plane maker’s various troubles. The strike, which S&P Global Rankings estimates costs Boeing greater than $1 billion a month, bookends an already difficult 12 months that began with a near-catastrophic blowout of a 737 Max door plug and comes six years after the primary of two fatal Max crashes put the storied manufacturer in constant crisis mode.
The union and company remain at an impasse, and airplane production at factories within the Seattle area and other locations has been idled, depriving Boeing of money. Boeing last week pulled a sweetened contract offer that the union had rejected, saying it wasn’t negotiated.
Boeing officials had been upbeat to airline customers about attending to a deal within the weeks before the unique vote, in response to people aware of the matter who spoke on the condition of anonymity since the conversations were private.
But that optimism didn’t pan out, as staff on Sept. 13 voted 95% against an initial tentative labor deal.
“They’ll should increase their offer. There isn’t any doubt about that,” said Harry Katz, a professor who studies collective bargaining at Cornell University’s School of Industrial and Labor Relations. He said one among the union’s demands, a return to a pension plan, is unlikely, nevertheless, and estimated the strike could last two to 5 more weeks.
The strategy of ending strike has turned more fraught, with federally mediated talks breaking down midweek.
Boeing on Thursday said it filed an unfair labor practice charge with the National Labor Relations Board that accused the International Association of Machinists and Aerospace Staff union of negotiating in bad faith and misrepresenting the plane makers’ proposals.
Late Friday, Jon Holden, president of the striking staff’ union, IAM District 751, pushed for a return to negotiations.
“CEO Ortberg has a possibility to do things otherwise as an alternative of the usual drained labor relations threats used to intimidate and crush anyone that stands as much as them,” he said in a press release. “Ultimately, it can be our membership that determines whether any negotiated contract offer is accepted. They desire a resolution that’s negotiated and addresses their needs.”
Boeing’s unionized machinists usually are not receiving paychecks and lost their company-backed medical insurance at the top of September. Nevertheless, unlike throughout the last Boeing factory strike in 2008, there’s more contract work within the Seattle area to assist staff fill the gaps. A union message board posts job opportunities like driving for food delivery services and warehouse work.
Slashing workforce
A Boeing 737 MAX aircraft is assembled on the Boeing Renton Factory in Renton, Washington, on June 25, 2024.
Jennifer Buchanan | AFP | Getty Images
After the stock market closed Friday, Ortberg said the corporate plans to cut its global workforce by about 10% “over coming months,” including layoffs of executives, managers and employees.
He also told staff that Boeing will stop producing business 767 freighters when it fulfills its backlog in 2027 and that the delivery of its 777X shall be delayed yet one more 12 months, to 2026.
The surprise cuts got here alongside preliminary financial results that showed deepening losses: Boeing said it expects to lose nearly $10 a share for the third quarter and that it can incur charges of about $5 billion in its business and defense units. The manufacturer hasn’t had an annual profit since 2018. Ortberg faces investors in his first full earnings call as CEO on Oct. 23.
“The thing is once they get 737 production on course all their money problems are gone but they don’t seem to be willing to settle to make that occur,” said Richard Aboulafia, managing director at AeroDynamic Advisory. “They’re firing a whole lot of individuals who could make that [stable production] occur. It looks like they’re form of burning down their very own house.”
Aboulafia estimated labor in final assembly of an aircraft accounts for about 5% of the airplane’s cost.
Ortberg is now tasked with drumming up money and stopping the bleeding as the corporate’s losses mount. Boeing’s shares are down 42% this 12 months through Friday’s close, the steepest drop since 2008.
Boeing and S&P 500 performance
“We also have to focus our resources on performing and innovating within the areas which might be core to who we’re, quite than spreading ourselves across too many efforts that may often end in underperformance and underinvestment,” Ortberg said in a note to staff on Friday.
S&P Global Rankings last week warned the corporate that it was vulnerable to a downgrade to junk status, as halted production of Boeing’s bestselling 737 Max and its 767s and 777s costs the corporate greater than $1 billion monthly. The estimate includes previously announced cost cuts like temporary furloughs, a hiring freeze and a halt of most purchase orders for affected aircraft.
Boeing is “facing issues on quality, labor relations, program execution and money burn, which appear to have created a continuous doom loop cycle,” said Bank of America aerospace analyst Ron Epstein in a note Friday. He said Boeing’s early financial release on Friday likely points to an equity raise within the works of as much as $15 billion.
Boeing 737 fuselages on railcars at Spirit AeroSystems’ factory in Wichita, Kansas, US, on Monday, July 1, 2024.
Nick Oxford | Bloomberg | Getty Images
The announced job cuts come after Boeing and the remainder of the aerospace supply chain worked to rent and train latest machinists and other specialists after pandemic-era buyouts and layoffs of hundreds of employees.
Instability at Boeing could fan out to its suppliers. Boeing’s 737 fuselage maker, Spirit AeroSystems, is considering furloughing staff in its cost-cutting contingency plans, a spokesman said, adding it hasn’t made any decisions. Boeing is within the strategy of acquiring that company.
“They’re probably telling us a story about cost savings carrying them through,” Aboulafia said of Boeing’s latest cost cuts. “When has stuff not working stopped them from trying it again?”
