Boeing workers strike over but aerospace giant still faces many challenges

As the machinists get back to work, management will have to address a host of other problems, and the company needs to get on better financial footing

Factory workers at Boeing have voted to accept a contract offer and end their strike after more than seven weeks, clearing the way for the company to restart idled Pacific Northwest assembly lines.

But the strike was just one of many challenges the troubled US aerospace giant faces as it works to return to profitability and regain public confidence.

Boeing's 33,000 striking machinists disbanded their picket lines late Monday after leaders of the International Association of Machinists and Aerospace Workers district in Seattle said 59 per cent of union members who cast ballots agreed to approve the company's fourth formal offer, which included a 38 per cent wage increase over four years.

 

Union machinists assemble the 737 Max, Boeing's bestselling airliner, along with the 777 or triple-seven jet and the 767 cargo plane at factories in Renton and Everett, Washington. Resuming production will allow Boeing to generate much-needed cash, which it has been bleeding.

Even for a company the size of Boeing, it is a life-threatening problem, said Gautam Mukunda, lecturer at the Yale School of Management.

The union said its workers can return to work as soon as Wednesday or as late as November 12. Boeing CEO Kelly Ortberg has said it might take a couple of weeks to resume production in part because some workers might need retraining.

As the machinists get back to work, management will have to address a host of other problems. The company needs to get on better financial footing. But while doing so, it also needs to prioritize the quality of its workmanship and its relationships with employees and suppliers, analysts said.

Boeing has been managing itself to meet short-term profit goals and squeezing every stakeholder, squeezing every employee, every supplier to the point of failure in order in order to maximize their short-term financial performance, Mukunda said. That is bad enough if you run a clothing company. It is unacceptable when you are building the most complex mass-produced machines human beings have ever built.

Above all, Boeing needs to produce more planes. When workers are back and production resumes, the company will be producing about 30 737s a month, and they must get that number over 50. They have to do it. And the people who are going to do that are the workers on the factory floor, Mukunda said.

Another challenge will be getting the company's fragile supply chain running again, said Cai von Rumohr, an aviation analyst at financial services firm TD Cowen. Suppliers that were working ahead of Boeing's schedule when the strike began may have had to lay workers off or finance operations on their own.

"There are lots of nasty questions in terms of complexities that go into revamping the supply chain, he said.

One way Boeing could generate cash would be to sell companies that don't fit directly in the business, such as flight information provider Jeppesen Sanderson, which it bought in 2000 for $1.5 billion, von Rumohr said.

They'd lose some earnings but they'd get a lot of cash to reduce their debt, he added. They really need to get to a more stable position where they have a solid credit rating.

Ortberg acknowledged the challenges ahead in a message to employees after they voted to end the walkout.

There is much work ahead to return to the excellence that made Boeing an iconic company," he said.

The average annual pay of Boeing machinists is currently $75,608 and eventually will rise to USD 119,309 under the new contract, according to the company. The union said the compounded value of the promised pay raise would amount to an increase of more than 43 per cent over the life of the agreement.

Reactions were mixed even among union members who voted to accept the contract.

Although she voted yes, Seattle-based calibration specialist Eep Bolao said the outcome was most certainly not a victory. Bolao said she and her fellow workers made a wise but infuriating choice to accept the offer.

We were threatened by a company that was crippled, dying, bleeding on the ground, and us as one of the biggest unions in the country couldn't even extract two-thirds of our demands from them. This is humiliating," she said.

For other workers like William Gardiner, a lab lead in calibration services, the revised offer was a cause for celebration.

I'm extremely pumped over this vote, said Gardiner, who has worked for Boeing for 13 years. We didn't fix everything that's OK. Overall, it's a very positive contract.

Along with the wage increase, the new contract gives each worker a $12,000 ratification bonus and retains a performance bonus the company wanted to eliminate.

President Joe Biden congratulated the machinists and Boeing for coming to an agreement that he said supports fairness in the workplace and improves workers' ability to retire with dignity. The contract, he said, is important for Boeing's future as a critical part of America's aerospace sector.

A continuing strike would have plunged Boeing into further financial peril and uncertainty. Last month, Ortberg announced plans to lay off about 17,000 people and a stock sale to prevent the company's credit rating from being cut to junk status.

The labour standoff the first strike by Boeing machinists since an eight-week walkout in 2008 was the latest setback in a volatile year for the aerospace giant.

Boeing came under several federal investigations this year after a door plug blew off a 737 Max plane during an Alaska Airlines flight in January. Federal regulators put limits on Boeing airplane production that they said would last until they felt confident about manufacturing safety at the company.

The door-plug incident renewed concerns about the safety of the 737 Max. Two of the planes had crashed less than five months apart in 2018 and 2019, killing 346 people. The CEO at the time, whose efforts to fix the company failed, announced in March that he would step down. In July, Boeing agreed to plead guilty to conspiracy to commit fraud for deceiving regulators who approved the 737 Max.