SEATTLE, Sept 13 (Askume) – A U.S. federal mediator said on Friday that Boeing Co and union negotiators would return to the bargaining table early next week, as the two sides try to end a strike that put the resumption of work on the plane at risk.
The Federal Mediation and Conciliation Service said Friday it was bringing the parties together with federal mediators after talking to both sides. The incident came less than a day after union members overwhelmingly rejected Boeing’s contract offer and went on strike.
“The two sides will resume talks early next week,” the statement said.
More than 30,000 members of the International Association of Machinists and Aerospace Workers (IAM) in the Seattle and Portland areas who produce Boeing’s best-selling planes voted by a 94.6% majority for their first full contract in 16 years. 96% rejected Boeing’s proposal, with 50% supporting the strike. Workers have vowed to fight for better pay than what the company is offering.
Shortly after midnight on the West Coast, striking workers began gathering outside Boeing plants in the Seattle area.
Chief Financial Officer Brian West said Boeing wants to return to the negotiating table and said the strike would make it harder for the plane maker to meet production targets for its 737 Max jets and stabilize its supply chain. Unions are also keen to get back to the bargaining table as soon as possible.
“This is a fight for our future,” John Holden, who leads negotiations for Boeing’s largest union, said Thursday before the strike outcome was announced.
Boeing declined to comment on the mediator’s remarks, and the union was not immediately available for comment.
At Seattle-area Boeing plants, where the Max, 777 and 767 jets are assembled, workers have been protesting all week. At the union hall Friday night, members cheered and chanted “Strike! Strike! Strike!”
Boeing shares fell 3.7% on Friday. The company’s stock price has fallen nearly 40% so far this year, losing about $58 billion in market value. The value of Boeing Co.’s corporate bonds has also fallen, widening the gap between its yield and that of similar U.S. Treasuries.
A prolonged strike could worsen the financial situation of Boeing, which already has a debt of $60 billion. Aircraft manufacturers need to generate enough cash flow to repay the debt. The strike will also affect airlines that fly Boeing planes and suppliers who make parts.
Moody’s has put the plane maker’s ratings under review, while Fitch said a prolonged strike could increase the risk of a ratings downgrade. On Thursday, S&P Global Ratings said a prolonged strike could hurt Boeing’s overall rating , which has fallen one notch above junk. The downgrade could increase Boeing’s debt issuance costs.
Boeing said it has offered workers all possible support and now must reach an agreement to end the strike and develop a plan for the investments needed to replace its best-selling single-aisle model. Chief Financial Officer West said the company is “focused on taking actions to conserve cash,” and said a strike would “jeopardize our recovery.”
New chief executive Kelly Ortberg was brought in just weeks after a 737 Max jet door panel exploded in mid-air last January to restore confidence in the plane maker. The contract he proposed included a 25% pay raise over four years, far short of the 40% workers were demanding. Union leaders recommended ratification of the contract , but angry members voted overwhelmingly to strike and fight, demanding a 40% increase in base pay and annual bonuses.
Recently, unionized workers in industries and companies including major automakers, delivery service UPS (UPS.N) and others have taken advantage of tight labor markets and demands to fight inflation to secure double-digit pay increases.
Challenges facing Boeing
The proposed deal includes a $3,000 signing bonus and a commitment to build Boeing’s next commercial airplane in the Seattle area when the program begins during the contract term.
Equity research firm Melius Research said average employee compensation at aerospace and defense companies is expected to rise 12% between 2018 and 2023. Boeing shares fell 6%, and shares of Spirit AeroSystems , which agreed to be acquired by aircraft structure maker Boeing, fell 19%.
“As long as necessary”
On Friday morning, crowds of striking workers marched to six different entrances of the Boeing plant, honking horns and banging fists on windows. When the doughnuts arrived, people had grateful smiles on their faces.
“I’m prepared to strike for two months or more,” said James Mann, 26, who works in a wing unit.
White House spokeswoman Robin Patterson said President Joe Biden’s administration has been in touch with both sides and urged them “to negotiate in good faith an agreement that gives workers the benefits they deserve and allows companies to grow more powerful.”
Boeing suppliers said the company could mitigate the damage from the strike by taking advantage of a Washington state program that provides some compensation to workers for reduced hours. JPMorgan said Boeing could adjust the pace of its material purchases. “At the very least, a prolonged strike could impact suppliers’ growth expectations,” said analyst Seth M. Seifman.
The last strike by Boeing workers in 2008 shut down the plant for nearly two months and cost an estimated $100 million a day in lost revenue. According to TD Cowen, a 50-day strike could cost Boeing $3 billion to $3.5 billion in lost cash flow.
The plane maker has received more than 4,700 orders for the 737 MAX jet, with Southwest Airlines (LUV.N) , United Airlines (UAL.O) and Lion Air among the top three for deliveries, according to aviation data provider Cirium Clients.
United Chief Financial Officer Michael Leskinen said Boeing is “doing much better” and delivery rates are stabilizing. “There is a threat of a strike. I won’t comment on that. It would definitely be a standoff.”
Southwest Airlines, Cathay Pacific (0293.HK) and flydubai all said they were in contact with Boeing.
