Boeing (BA) finds itself stuck between a rock and a hard place as the labor strike between it and the International Association of Machinists (IAM) union nears a second week.
On Monday, Boeing upped its offer to the union, which represents 33,000 workers, but did not proceed through union leadership and instead sent a “best and final” offer directly to workers, which didn’t sit well with the IAM. Boeing’s latest offer upped pay hikes to 30% from 25% in the prior offer, doubled a signing bonus to $6,000, and increased 401(k) contributions, among other things.
“The survey results from yesterday were overwhelmingly clear, almost as loud as the first offer: members are not interested in the company's latest offer that was sent through the media,” IAM said in a statement late Tuesday night. “Many comments expressed that the offer was inadequate and the company's decision to bypass the Union was viewed as disrespectful.”
Earlier, IAM said it contacted Boeing to engage in “direct talks” after the offer, which the company refused. Therefore, the union said it would not be holding a vote on the proposal.
Nevertheless, Boeing’s insistence on going directly to union members speaks to the difficulty the company is in, said Anita Mendiratta, an aviation and tourism expert at consulting firm AM&A.
IAM union workers also know they have public support behind them, as big labor has seen its popularity grow, while Boeing has seen its standing suffer. The union is in a “very strong position,” Mendiratta said, as the strike not only puts financial pressure on Boeing but also hurts Boeing on a “reputational level” too.
With the strike hitting Boeing’s bottom line by as much as $1.8 billion thus far, the plane maker needs to make a deal soon. Boeing shares are already down an astounding 40% year to date.
Shareholders hope Boeing and new CEO Kelly Ortberg can make a deal and reverse the cash drain by the time the plane maker is expected to report third quarter earnings at the end of October.
“Boeing is already having to do some significant re-examination of the financials of the organization. To put this in context, every single day that Boeing is on strike, they’re losing between $100 million and $150 million,” Mendiratta said to Yahoo Finance.
Without union workers based in Boeing’s Renton, Wash., assembly facility, Boeing cannot deliver its 737 Max jets, which are the company’s cash cow. Boeing is still able to deliver its 787 Dreamliner out of its non-union South Carolina facility; however, those jets are limited in number. In the second quarter, Boeing delivered 70 737 Max jets, but only nine of the larger Dreamliners.
Mendiratta, who is also special adviser to the UN Tourism Secretary-General, said disruptions in Boeing not only hurt the American plane maker but also the aviation industry as a whole.
“It’s not just Boeing that’s in trouble — the entire global aviation system is in trouble because it relies on Boeing for 4 in 10 commercial aircraft as well as what it delivers in its other divisions,” Mendiratta said. “When there is a delay in the delivery of aircraft, and there are many airlines that are having delays, it means that the entire global aviation ecosystem is going to suffer, as is the global traveling public.”
Mendiratta doesn’t see the union bending here, at least not in the short term. Boeing put workers in a difficult position that led them to strike in the first place, she said, and emotions are running high following Boeing’s latest move to circumvent IAM leadership.
IAM union workers also know they have public support behind them, as big labor has seen its popularity grow, while Boeing has seen its standing suffer. The union is in a “very strong position,” Mendiratta said, as the strike not only puts financial pressure on Boeing but also hurts Boeing on a “reputational level” too.
With the strike hitting Boeing’s bottom line by as much as $1.8 billion thus far, the plane maker needs to make a deal soon. Boeing shares are already down an astounding 40% year to date.
Shareholders hope Boeing and new CEO Kelly Ortberg can make a deal and reverse the cash drain by the time the plane maker is expected to report third quarter earnings at the end of October.
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