Boeing and its largest union said Sunday they had reached an agreement on a new contract that, if ratified, would avert a strike that threatens to shut down plane production this coming weekend.
Boeing said the 33,000 workers represented by the International Association of Machinists and Aerospace Workers will receive a 25% pay increase over the four-year contract, with average wages rising 33% due to the increase in seniority measures. That’s less than the 40% the union asked for during negotiations.
But the company agreed to union demands to build the next plane in Washington state, presumably with union members.
Workers will also get a $3,000 lump-sum payment and lower health care costs, Boeing said. The company will make new 401(k) contributions of up to $4,160 per employee, but the union won’t get a request to restore the defined benefit pension plan that was eliminated in 2014.
“Negotiations are give and take, and although there is no way to achieve success on every item, we can honestly say that this proposal is the best contract that has been negotiated in our history,” Jon Holden, president of IAM District 751, post machinist union at Boeing, said in a statement posted on the union’s website.
The union’s bargaining committee recommended members ratify the contract, Holden said.
The president of Boeing’s commercial aircraft division, Stephanie Pope, said Sunday in a video to employees that the proposed contract includes the company’s largest public pay increase. He said Boeing’s promise to build new planes in the Puget Sound region means job security for generations to come.
The proposed contract is contingent on union members ratifying it before midnight Thursday Pacific time, after the union threatened to strike.
The union has scheduled a two-part election for Thursday, with workers voting on whether to accept the contract, and whether to authorize a strike if they reject the offer. Voting will take place at about half a dozen locations in Washington state and one in California.
A strike would add to the headwinds facing Boeing, which is hurtling into six straight money-losing years and just hired a new CEO to turn it around.
The new chief executive, Kelly Ortberg, will try to reverse the loss of $ 27 billion from the beginning of 2019. His tasks include fixing problems in the manufacturing process of Boeing aircraft, obtaining regulatory approval for the long-delayed 777X jumbo jet, limiting the damage from passing. -budget government contracts, paying down $45 billion in net debt, and absorbing Spirit AeroSystems, a key money-losing supplier that Boeing just bought for $4.7 billion.
Ortberg has sounded conciliatory towards the machinists’ union.
“They understand that the relationship is very contentious with the unions, and they want to make that relationship better,” said TD Cowen aerospace analyst Cai von Rumohr.
A walkout at Boeing does not affect consumers, but it will shut down the production of Boeing planes, cutting off the cash needed. Von Rumohr said that aircraft manufacturers typically get about 60% of the purchase price when they are delivered, “so not delivering an aircraft has a huge impact on cash flow, and your costs may continue.”
An eight-week strike in 2008, Boeing’s longest since a 10-week stoppage in 1995, cost the company about $100 million a day in delayed revenue.
Before the tentative agreement was announced, Jefferies aerospace analyst Sheila Kahyaoglu estimated that the strike would cost the company about $3 billion based on the 2008 strike plus inflation and current aircraft production levels.
Boeing is in worse financial shape than it was in 2008. The company has lost $27 billion since the start of 2019, roughly when its best-selling plane, the 737 Max, was grounded worldwide after crashes in Indonesia and Ethiopia. Income goes down, debt goes up.
Boeing’s greatest strength is that it remains one of the world’s two largest manufacturers of airline jets, a duopoly with Europe’s Airbus. Boeing has a huge order worth more than $500 billion.
