Boeing factory strike passes one month as pressure mounts on CEO

It's been just over a month since the number reached more than 30,000 Boeing Mechanics left the job after voting overwhelmingly for an initial contract. Costs and tensions have risen since then.

The strike increases pressure on Boeing's new CEO, Kelly Ortberg, who was appointed over the summer to solve various problems facing the plane manufacturer. The strike, which Standard & Poor's ratings agency estimates is costing Boeing more than $1 billion a month, ends an already difficult year that began with the near-catastrophic explosion of a 737 MAX door plug, and comes six years after the first two fatal MAX accidents. The storied manufacturer is in constant crisis mode.

The union and the company remain at an impasse, and aircraft production has been halted at plants in the Seattle area and other locations, depriving Boeing of funds. Boeing last week withdrew a reduced contract offer that the union rejected, saying it had not been negotiated.

Boeing officials had been optimistic to airline customers about a deal in the weeks before the original vote, according to people familiar with the matter who spoke on condition of anonymity because the talks were private.

But this optimism did not pan out, as on September 13 workers voted 95% against the initial labor deal.

“They're going to have to increase their offer. There's no doubt about that,” said Harry Katz, a professor who studies collective bargaining at Cornell University's School of Industrial and Labor Relations. He said that one of the union's demands, a return to the retirement plan, was unlikely, and he estimated that the strike could last for another two to five weeks.

The process of ending the strike has become more difficult, with federal mediation talks collapsing midweek.

Boeing said Thursday it has filed an unfair labor practice charge with the National Labor Relations Board that accused the International Association of Machinists and Aerospace Workers of negotiating in bad faith and misrepresenting the plane makers' proposals.

Late Friday, John Holden, president of the striking workers' union, IAM District 751, called for a return to negotiations.

“CEO Ortberg has an opportunity to do things differently instead of the same old, tired business relations threats used to intimidate and crush anyone who stands up to them,” he said in a statement. “Ultimately, our membership will determine whether any negotiated contract offer will be accepted. They want a negotiated solution that meets their needs.”

Unionized mechanics at Boeing are not receiving pay and lost their company-subsidized health insurance at the end of September. However, unlike the last Boeing factory strike in 2008, there is more contracting work in the Seattle area to help workers fill the gaps. The union's message board posts job opportunities such as driving for food delivery services and warehouse work.

After the stock market closed on Friday, Ortberg said the company plans to reduce its global workforce by about 10% “over the coming months,” including laying off executives, directors and employees.

He also told employees that Boeing will stop producing 767 commercial freighters when it clears its backlog in 2027, and that deliveries of its 777X planes will be delayed another year, until 2026.

The surprise cuts came alongside preliminary financial results that showed deepening losses: Boeing said it expects to lose nearly $10 a share in the third quarter and that it will take a charge of about $5 billion at its commercial and defense units. The manufacturer has not made an annual profit since 2018. Ortberg faces investors in his first full earnings call as CEO on October 23.

“The thing is, once they get 737 production on track, all their financial problems are over, but they're not ready to accept that it happens,” said Richard Aboulafia, managing director at AeroDynamic Advisory. “They're firing a lot of people who could make it (stable production). It's like they're kind of burning down their house.”

Abulafia estimates that labor in the final assembly of the plane represents about 5% of the cost of the plane.

Ortberg is now tasked with raising cash and stemming the bleeding as the company's losses mount. Boeing shares were down 42% this year through Friday's close, the biggest decline since 2008.

“We also need to focus our resources on performance and innovation in core areas of our identity, rather than spreading ourselves across too many efforts that can often lead to underperformance and underinvestment,” Ortberg said in a memo to staff on Friday. .

S&P Global Ratings last week warned the company that it was at risk of being downgraded to junk status, as the grounding of production of Boeing's best-selling 737 MAX and the 767 and 777 jets costs the company more than $1 billion a month. The estimate includes previously announced cost reductions such as furloughs, hiring freezes and the halting of most orders for the affected aircraft.

Boeing “is facing issues with quality, labor relations, program execution and cash burn, which appear to have created a continuing cycle of doom,” Ron Epstein, an aviation analyst at Bank of America, said in a note on Friday. He said Boeing's early financial statement on Friday likely indicated an equity increase in the business of up to $15 billion.

The announced job cuts come after Boeing and the rest of the aerospace supply chain worked to hire and train new mechanics and other specialists following acquisitions and laid off thousands of employees in the pandemic era.

The instability at Boeing may extend to its suppliers. fuselage maker boeing 737, Air spirit systemsA company spokesman said that it was considering furloughing workers in its emergency plans to reduce costs, adding that it had not made any decisions. Boeing is in the process of acquiring that company.

“Maybe they will tell us a story about the cost savings that enables them to survive,” Aboulafia said of Boeing's latest cost cuts. “When does not doing things stop them from trying them again?”