Boeing is freezing hiring and weighing temporary furloughs to cut costs as a strike by more than 30,000 workers entered its fourth day on Monday.
The planemaker and union leadership badly misjudged anger among union members who backed a strike with 96% support last week, stopping production of its 737 series just as Boeing was trying to speed up assembly lines. Now executives need to find a way to contain the work stoppage with a fresh offer in talks which resume on Tuesday.
“This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future,” CFO Brian West told employees in a letter on Monday. Boeing will stop issuing the majority of supplier purchase orders on the 737, 767 and 777 programs affected by the stoppage, West wrote, adding, “I know that these actions will create some uncertainty and concern.”
West last week said that the first priority was preserving Boeing’s credit rating, which is hovering one notch above junk.
The decision to stop placing most orders for parts for all Boeing jetliner programmes except the 787 Dreamliner is exceptionally rare and will send shockwaves through an industry still struggling to rebuild from the bottom up after COVID-19.
Some executives immediately warned of a vicious cycle of departures just as the industry is battling competition from other sectors to attract new aerospace workers and engineers.
“The smaller companies don’t have the cash to ride this out so they will start layoffs,” a senior supply chain source said. “Then those people won’t come back immediately and round the cycle goes again.”
SAFETY AND PRODUCTION CRISIS
Even before its factory workers downed tools, Boeing was wrestling with a safety and production crisis sparked by a door panel flying off a near-new 737 MAX plane in midair in January and is saddled with $60 billion of debt.
“We believe an extended strike would be costly and difficult to absorb, given the company’s already strained financial position,” said S&P Global Ratings in a note on Monday. “A shorter strike, on the order of weeks, would likely be manageable for Boeing and not lead to a negative rating action.”
Equity analyst Chris Olin at Northcoast Research said that Boeing would likely have to cut 33-35 jets from its production plan because of the strike, resulting in $102 million lost revenue daily and as much as $3 billion or more overall.
The International Association of Machinists and Aerospace Workers (IAM) rejected an offer that included a 25% pay increase spread over four years but removed an annual performance bonus. The union originally had asked for a 40% hike.
Union leaders will meet with federal mediators and Boeing on Tuesday, the IAM said in a post on its X social media feed on Saturday.
Jon Holden, the lead union negotiator, said on Saturday that workers wanted Boeing to increase its wage offer and reinstate a defined-benefit pension that was taken away a decade ago in return for keeping plane production in Washington State.
Two union sources told Reuters they didn’t expect Boeing to restore the old pension, but that demand could be used to negotiate bigger company pension contributions and higher pay.
Union members on the picket lines outside Boeing factories around Seattle were bullish about their chances of getting a better deal out of Boeing, but few expect it to happen quickly.
“Not with the history of the way Boeing and the union have negotiated in the past,” said Chris Ginn, a 37-year-old who works in a factory north of Seattle building 777 jets.
(Reuters)
