Striking machinists will decide this week whether to ratify an agreement
Boeing $BA’s (BA) future could hang in the balance of a union ratification vote on Wednesday. Over the weekend, the International Association of Machinists and Aerospace Workers (IAM) told its members engaged in the work stoppage that they’ll decide this week whether to accept an agreement the company presented that features a 35% wage increase.
“The future of this contract is in your hands,” the union told members. “Thank you for your continued input and support throughout this process.”
The planemaker’s long, slow recovery from years of scandal might take even longer and become more expensive if striking machinists vote down the company’s latest contract offer.
The offer is better than what was supposed to be Boeing’s “best and final offer” of a 30% raise, likely the result of acting Secretary of Labor Julie Su coming to town. Still, it’s less than the 40% bump workers have been seeking. Plus, the offer doesn’t include a restoration of the pension that has been a sticking point in negotiations.
The strike has been going for more than a month, the point at which some observers believe Boeing’s $50-million-a-day cash drain will begin to get especially difficult for the company. After furloughing workers early on, Boeing has since kicked the striking workers off company health care plans and announced plans to lay off 10% of its workforce.
Though the manufacturer unveiled plans to raise as much as $35 billion in new cash (on top of the $10 billion it raised earlier this year), uncertainty over the state of Boeing’s labor relations could further complicate what is already a very complicated maneuver.
After a pair of fatal plane crashes in 2018 and 2019, Boeing had a tough time restoring public trust, output, and revenues. Then, in January, a piece of fuselage fell off a plane just when the company was set to begin its comeback run after the COVID-19 pandemic. After the Federal Aviation Administration (FAA) imposed a continuing production rate cap so Boeing could address quality-control issues, chief financial officer Brian West said the company would be sending billions of dollars in cash out the door for a while without the lost income.
Then, the strike paused production on the majority of the planes making up Boeing’s order backlog. The company’s much-needed investment-grade credit rating hangs on by a thread, and losing it would make the path to recovery steeper and more expensive should Boeing need to borrow more money along the way. Fitch Ratings said last week that Boeing’s cash-raising actions “support liquidity amidst continued operational challenges” — but with a caveat.
Getting back on track, Fitch said, would require Boeing to get its strike settled by the end of the year so that it could focus on building up its production capacity for the key 737 Max model that it was struggling to build at the speed limit the FAA put in place even before the machinists’ work stoppage. No contract would throw a big question mark into the equation.
“Fitch continues to evaluate the company’s ability to adhere to our negative rating sensitivity,” the ratings agency said.
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