Boeing’s U.S. factory workers on strike after rejecting pay increases of 25% over 4 years

Boeing’s U.S. West Coast factory workers walked off the job early on Friday after 96 per cent voted in favour of a strike, halting production of the planemaker’s strongest-selling jet as it wrestles with chronic output delays and mounting debt.

The workers’ first strike since 2008 began just weeks after new CEO Kelly Ortberg was brought on in August to restore faith in the planemaker after a door panel blew off a nearly new 737 MAX jet in mid-air in January.

Roughly 30,000 International Association of Machinists and Aerospace Workers (IAM) members who produce Boeing’s 737 MAX and other jets in the Seattle and Portland areas voted on their first full contract in 16 years, overwhelmingly rejecting the deal and favouring a strike.

“This is about respect, this is about addressing the past and this is about fighting for our future,” said Jon Holden, who headed the negotiations for Boeing’s largest union, before announcing the vote result on Thursday evening.

“We strike at midnight,” said the union leader who had agreed to the just-defeated deal, as members in the union hall cheered and chanted: “Strike! Strike! Strike!”

Boeing said late on Thursday the vote sent a clear message that the tentative deal it reached with IAM leadership was not acceptable to members.

“We remain committed to resetting our relationship with our employees and the union, and we are ready to get back to the table to reach a new agreement,” the planemaker said in a statement.

The deal included a general wage increase of 25 per cent, a $3,000 signing bonus and a pledge to build Boeing’s next commercial jet in the Seattle area, provided the program was launched within the four years of the contract.

Although IAM leadership recommended last Sunday that its members accept the contract, many workers had responded angrily, arguing for the originally demanded 40-per-cent pay rise and lamenting the loss of an annual bonus.

“We’re going to get back to the table as quickly as we can,” Holden told reporters, without saying how long he thought the strike would last or when talks would resume. “This is something that we take one day at a time, one week at a time.”

Boeing shares down

Workers have been protesting all week in Boeing factories in the Seattle area that assemble Boeing’s MAX, 777 and 767 jets.

Boeing shares closed up 0.9 per cent on Thursday before the vote results were announced but are down 36 per cent this year on concerns over safety, production and a $60-billion debt burden.

A strike presents Boeing with multiple challenges: it will need to decide how to respond at the bargaining table, after saying it had offered everything it could. It also must find a way to secure factories full of extremely valuable, partially built planes without union workers to do the job.

A letter to workers on Wednesday, Ortberg said “a strike would put our shared recovery in jeopardy, further eroding trust with our customers and hurting our ability to determine our future together.”

If prolonged, a strike would weigh not only on Boeing’s financials, but on airlines that depend on the planemaker’s jets and suppliers who manufacture parts and components for its aircraft.

Air India CEO Campbell Wilson said on Friday that Boeing’s 737 MAX deliveries to his airline appeared to be “delayed a little bit” even before the strike announcement because of regulatory scrutiny after the Alaska Airlines incident and supply chain issues affecting the broader industry.

“There’s nothing official yet, but I think the indication is, or the expectation is, that it’s going to be a little bit later,” he said in an interview in Sydney.

According to a pre-vote note from TD Cowen, a 50-day strike could cost Boeing an estimated $3 billion to $3.5 billion of cash flow.

The Boeing workers’ last strike in 2008 shuttered plants for 52 days and hit revenue by an estimated $100 million per day.