Boeing's new contract agreement includes a 35% salary increase over four years, an increase in retirement plan contributions, as well as benefits such as a $7,000 bonus. However, despite these perks, 64% of workers voted against it. Currently, reaching a new agreement and ending the strike is a top priority for the new CEO, Kelly Ortberg. The union chairman stated that the new contract is still not satisfactory enough for the workers, and negotiations will continue
Boeing's new contract agreement includes a 35% salary increase over the next four years, but the workers are not buying it.
On Wednesday, October 23rd, Eastern Time, the Boeing union stated that 64% of the workers voted against the agreement and will continue to strike. This decision poses a further risk of halting production lines in the Seattle area for Boeing, affecting the production of most aircraft.
This undoubtedly adds insult to injury to Boeing's financial chain. The company reported a loss of over $6 billion in the third quarter, the largest loss since 2020. Standard & Poor's Global Ratings stated that the strike is causing Boeing to lose approximately $1 billion per month, putting the company's investment-grade credit rating at risk. This will increase borrowing costs for Boeing, which urgently needs to raise funds.
Jon Holden, President of IAM District 751, stated at a press conference on Wednesday evening that they have made significant progress in this agreement, but the new contract is not satisfactory to the workers, so they will continue negotiations.
Boeing's new CEO, Kelly Ortberg, stated that his top priority now is to reach an agreement with the workers to get everyone back to work and improve the company's situation. Ortberg has outlined Boeing's future plans, including streamlining the company's operations to focus on core businesses. Earlier this month, he announced that Boeing would lay off 10% of its global workforce, totaling 170,000 employees.
Strike to Last Over Five Weeks
The strike that began on September 13th is the first strike by over 32,000 Boeing workers since 2008, as they were dissatisfied with the proposed 25% salary increase. The reason is the increasing cost of living in the Puget Sound region, where they had hoped for a 40% raise.
Although Boeing reached a preliminary agreement with the union on labor contracts last Saturday, offering workers a new contract including a 35% salary increase over the next four years, increased contributions to retirement plans, and benefits such as a $7,000 bonus, some workers are still dissatisfied because the latest proposal does not include pension plans. Some workers are unhappy about losing their pension plans from the previous contract signed in 2014.
However, Ben Tsocano, Managing Director of Standard & Poor's Global Ratings, stated that due to the workers' disagreement with the new contract, the strike could be prolonged, and the company is unlikely to agree to provide pension plans due to the high costs.
The strike is also a headache for Boeing's major customers, as it further delays the delivery times for many Boeing customers. Robert Isom, CEO of American Airlines, said in an interview with CNBC on Thursday that he hopes one day Boeing's issues will no longer be a concern, as they have been a headache for the past five years. We need them to deliver high-quality aircraft on time, and American Airlines expects to achieve its production capacity plan next year. I look forward to Boeing calling to say they can do it.
The long-term shutdown is also a challenge for the aerospace supply chain, as the supply chain has not fully recovered after the pandemic, and Boeing has a lot of suppliers who need to train new employees quickly. When Boeing workers went on strike, Boeing was planning to increase aircraft production, busy increasing the output of 737 aircraft and other models