Boeing factory workers rejected a new labour contract that would have increased their wages by 35 per cent over four years, exacerbating the aircraft manufacturer’s crisis as it struggles to overcome a crippling work stoppage.
Some 64 per cent of the union members who cast ballots on Wednesday voted against the tentative agreement, according to the International Association of Machinists and Aerospace Workers district representing the 33,000 striking workers.
“We remain on strike,” IAM District 751 President Jon Holden said after the vote count. “Our members deserve more and have spoken loudly.”
While the opposition this time was smaller than the overwhelming 94 per cent vote to reject the company’s initial offer in September, the result is a setback to Boeing’s efforts to get operations back on track. The plane maker has been forced to suspend work on its 737 and larger 767 and 777 airliner models at its Seattle-area manufacturing hub for more than a month, weighing on its finances and putting credit-rating companies on alert for a possible downgrade to junk status.
“Basically October is wiped out, some of November is now wiped out, and it’s going to cascade through the entire supply chain,” Sheila Kahyaoglu, an analyst at Jefferies, said.
Boeing dropped 3.2 per cent in premarket trading in the US. The stock has lost 40 per cent this year, putting it on track for its worst annual performance since 2008.
The move will send Boeing and the union back to the negotiating table following six weeks of stop-start talks that eventually led to the White House dispatching Acting Secretary of Labor Julie Su to Seattle to help break the stalemate. While Boeing’s latest pay offer was a bump from its initial 25 per cent increase, workers are still angered by the failure to reinstate their defined-benefit pension plan.
“The loss of the pension is still right at the heart of this for many” union members, Holden said. “We’re going to put all cards on the table” to see what Boeing can offer in lieu of the pension plan, he added.
The strike has derailed the planemaker’s financial recovery, and its after-effects will linger deep into 2025. Boeing expects to burn cash next year, one reason the company is preparing a potential equity sale to bolster its reserves, executives said during an earnings call on Wednesday.
The manufacturer was on track to generate a surge of revenue from rising jet deliveries prior to the labour strife. With that activity all but halted, Boeing expects to burn around $4 billion (€3.7 billion) in cash during the fourth quarter, similar to its outflow earlier this year, according to chief financial officer Brian West. The would bring the company’s total free cash outflow to around $14 billion for 2024, its worst performance since the Covid pandemic flattened air travel in 2020.
Investors had seen the vote as a possible positive catalyst to help the plane maker turn a corner on a year of cascading crises. The labour strife is costing the company about $100 million a day in lost revenue by some estimates, and the stoppage has shut down Boeing plants in Washington, Oregon and California.
Boeing’s new chief executive Kelly Ortberg has already instituted a range of cost cuts to weather the fallout from the strike, including a 10 per cent reduction in the workforce alongside other measures that include hiring freezes and travel bans. Ortberg took over in August following a shake-up of senior management in the wake of cascading crises since the start of the year at Boeing.
The fallout is also rippling through Boeing’s suppliers. Spirit AeroSystems has said that it will furlough 700 workers, and that it might need to resort to lay-offs if the strike continues into next month.
Some airlines, meanwhile, have had to revise their growth targets because they’re not likely to get the aircraft they had planned for next year. Boeing had previously sought to return its 737 Max model to a production rate of 38 a month by year-end, with analysts now saying that it’s unlikely to reach that target until well into 2025.
The strike by IAM District 751 is the first major labour dispute at Boeing in 16 years. As hourly workers are pushing for 40 per cent pay increases and better retirement benefits, they’re driven by resentment over receiving paltry wage increases over the past decade while senior executives were richly rewarded.
“I’m in favour of a fair contract,” said Charles Fromong, 59, a machine tool repair mechanic working for Boeing’s military aircraft division. “The strike is just a byproduct of Boeing not paying people what they are worth.”
– With assistance from Danny Lee, Zoe Ma, Michael Sin, Jonathan Ferro and Annmarie Hordern. – Bloomberg
