It's been slightly over a month, since greater than 30,000 Boeing Machinists walked off the job after voting overwhelmingly against a tentative contract. Since then, costs and tensions have only increased.
The strike increases pressure on Boeing's latest CEO, Kelly Ortberg, who was hired over the summer to deal with the plane maker's various problems. The strike, which S&P Global Ratings estimates is costing Boeing greater than $1 billion a month, caps an already difficult 12 months that began with a near-catastrophic bursting of a door plug on the 737 Max and comes six years after the primary of two fatal Max crashes follows traditional manufacturers in constant crisis mode.
The union and the corporate remain at an impasse, and aircraft production has been halted at factories within the Seattle area and elsewhere, depriving Boeing of money. Boeing last week withdrew a sweetened contract offer that the union rejected, saying it had not been negotiated.
Boeing officials expressed optimism to airline customers that an agreement may very well be reached within the weeks before the unique vote, in response to people aware of the matter.
But this optimism didn’t come true, as employees voted 95% against a primary provisional collective agreement on September thirteenth.
“They need to increase their supply. There is no doubt about that,” said Harry Katz, a professor of collective bargaining at Cornell University’s School of Industrial and Labor Relations. But he said one in every of the union's demands, a return to a pension plan, was unlikely and estimated the strike could last one other two to 5 weeks.
The process to finish the strike has change into tougher as federally mediated talks broke down in midweek.
Boeing said Thursday it has filed an unfair labor practices lawsuit with the National Labor Relations Board, accusing the International Association of Machinists and Aerospace Workers union of negotiating in bad faith and misrepresenting the plane makers' proposals.
Late Friday, Jon Holden, president of the striking employees' union IAM District 751, urged a return to negotiations.
“CEO Ortberg has an opportunity to do things differently, rather than repeating the same old, tired labor relations threats that intimidate and oppress anyone who opposes them,” he said in a press release. “Ultimately, it will be our membership that will decide whether a negotiated contract offer is accepted. They want a solution that is negotiated and responsive to their needs.”
Boeing's union machinists are usually not receiving paychecks and lost their company-sponsored medical insurance at the top of September. However, unlike the last Boeing factory strike in 2008, there’s more contract work within the Seattle area to assist employees pick up the slack. Vacancies similar to driving for food delivery and warehouse work are posted on a union forum.
Staff reductions
After the market closed on Friday, Ortberg said the corporate planned to scale back its global workforce by about 10% “in the coming months,” including layoffs of executives, managers and employees.
He also told employees that Boeing will stop producing industrial 767 freighters when it meets its backlog in 2027 and that deliveries of its 777X might be delayed one other 12 months, until 2026.
The surprise cuts got here with surprise preliminary financial results that showed widening losses: Boeing said it expected a third-quarter lack of nearly $10 per share and that it might face charges of about $5 in its industrial and defense divisions Billions of US dollars can be incurred. The manufacturer has not made an annual profit since 2018. Ortberg will face investors in his first full earnings release as CEO on October twenty third.
“The thing is, once they get 737 production going, all their money problems will be solved, but they're not willing to settle for that,” said Richard Aboulafia, managing director of AeroDynamic Advisory. “They’re laying off a lot of people who could do it [stable production] happen. It seems like they are burning down their own house.”
Aboulafia estimates that the labor involved in final assembly of an aircraft accounts for about 5% of the aircraft's cost.
Ortberg is now tasked with raising money and stopping the blood loss as the corporate's losses mount. Shares of Boeing have fallen 42% this 12 months through Friday's close, their biggest decline since 2008.
Boeing and S&P 500 performance
“We also need to focus our resources on performance and innovation in the areas that are core to us, rather than spreading ourselves across too many efforts that can often lead to poor performance and under-investment,” Ortberg said Friday in a message to employees.
S&P Global Ratings warned the corporate last week that it faces a downgrade to junk status as suspended production of Boeing's best-selling 737 Max in addition to its 767 and 777 is costing the corporate greater than $1 billion a month. The estimate includes previously announced cost reductions similar to temporary furloughs, a hiring freeze and a halt to most orders for affected aircraft.
Boeing has faced “quality, labor relations, program execution and cash burn issues that appear to have resulted in a continuous vicious cycle,” Bank of America aerospace analyst Ron Epstein said in a note Friday. He said Boeing's early financial announcement on Friday likely indicated it was planning an equity raise of as much as $15 billion.
The announced job cuts come as Boeing and the remaining of the aerospace supply chain worked to rent and train latest machinists and other specialists following buyouts and layoffs of hundreds of employees in the course of the pandemic.
The instability at Boeing could extend to its suppliers. Boeing's 737 fuselage maker, Spirit AeroSystemsis considering furloughing employees as a part of its contingency plans to chop costs, a spokesman said, adding it had not yet made any decisions. Boeing is within the technique of taking on this company.
“They're probably telling us a story about cost savings that they're pushing through,” Aboulafia said of Boeing's recent cost cuts. “When did things not working stop them from trying again?”
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