SEATTLE, Sept 13 (Askume) – Boeing Co (BA.N) was eager to return to the negotiating table to limit losses and reach an agreement as work challenges mounted on Friday with a strike that pushed 30,000 workers on strike.
More than 30,000 members of the International Association of Machinists and Aerospace Workers (IAM), which makes Boeing’s best-selling 737 Max and other jets in the Seattle and Portland areas, voted for their first full contract in 16 years, with 94.6% rejecting it and 96% supporting a strike.
Boeing Chief Financial Officer Brian West said on Friday that the company wanted to return to the negotiating table, acknowledging the strike’s concerns about production, delivery and financial conditions. He said the strike would make it harder for Boeing to meet production targets for its best-selling 737 Max jet and stabilize its supply chain.
Moody’s has put the aircraft maker’s ratings under review, while Fitch said a prolonged strike could have significant operational and financial implications, raising the risk of a rating downgrade. On Thursday, S&P Global Ratings said a prolonged strike could hurt its overall rating , which has fallen one notch from junk.
The stock fell 3.8% on Friday. It has declined about 38% year to date, wiping off $58 billion in its market value.
The union also expressed its desire to resume negotiations as soon as possible.
“This is a fight for our future,” John Holden, the negotiating chief for Boeing’s largest union, said late Thursday before the vote results were announced. Holden told reporters the union would return to the bargaining table as soon as possible.
Boeing has said it has made every possible offer to workers to appease the striking workforce and plans the investments needed to replace its best-selling single-aisle model.
New CEO Kelly Ortberg was brought in a few weeks ago to restore confidence in the aircraft manufacturer . He proposed a deal that included a 25% pay raise over four years, well below the workforce’s 40% demand.
A prolonged strike could adversely impact the financial health of Boeing, which already has $60 billion in debt. Boeing needs to generate enough cash flow to meet debt maturities.
Unionized workers in many industries and companies , including delivery service UPS (UPS.N), the auto industry and others, have recently received double-digit pay raises, taking advantage of a tight labor market and offsetting rising inflation. Payroll requirements.
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.
According to data from equity research firm Melius Research, average employee compensation at aerospace and defense companies is expected to grow 12% between 2018 and 2023. Shares of Boeing Co. fell 6% and shares of Spirit AeroSystems dropped 19%.
Although the IAM leadership recommended its members accept the contract on Sunday, many workers expressed dissatisfaction and debated over basic necessities and the annual bonus.
Workers at Seattle-area Boeing plants that make the Max, 777 and 767 jets have been protesting all week.
At the union hall on Friday, members cheered and chanted “Strike! Strike! Strike!” as striking workers began gathering outside Seattle-area Boeing plants after midnight.
“As long as necessary”
Crowds of striking workers gathered at six different entrances to the Boeing plant on Friday, honking horns and waving fists at windows in support of the strike. Grateful smiles spread across faces as doughnuts were distributed to boost morale.
“I’m prepared to strike for two months or more,” said James Mann, 26, who works in a wing unit.
The Biden administration is in touch with both parties. White House spokeswoman Robin Patterson said, “We encourage them to negotiate in good faith to reach an agreement that gives workers the benefits they deserve and strengthens companies.”
A prolonged strike would hit airlines and parts suppliers that depend on Boeing planes.
JPMorgan said Boeing may adjust the pace of its material purchases. “At the very least, a prolonged strike could hurt suppliers’ growth expectations,” said analyst Seth M. Siefman.
The last strike by Boeing workers in 2008 shut down the plant for nearly two months and resulted in a loss of revenue of about $100 million per day. According to TD Cowen, a 50-day strike could cost Boeing $3 billion to $3.5 billion in lost cash flow.
CFM, the sole engine supplier for the 737 Max, said its operations would not be immediately affected.
The plane maker has received more than 4,700 orders for 737 MAX planes, with Southwest Airlines (LUV.N) , United Airlines (UAL.O) and Lion Air the three biggest customers expected to take deliveries, according to aviation data provider Cirium.
United Chief Financial Officer Michael Leskinen said the airline is “doing much better” and delivery rates have stabilized. “There is a threat of a strike. I’m not going to 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.
