Union members reject deal with Boeing, prolonging strike

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CNN
 — 

The strike by 33,000 workers at Boeing will continue after rank-and-file union members rejected an offer from the company in a vote on Wednesday and decided to remain on the picket lines instead.

The membership of the International Association of Machinists voted 64% against the deal, the union announced late Wednesday. While that was less than the 95% who rejected an earlier offer, it left the vote far short of the simple majority needed to end the strike.

“Our members deserve more,” said Jon Holden, the president of the largest IAM local at Boeing and its chief negotiator. “They’ve spoken loudly, and we’re going to go back to the table to try to achieve those things.”

Boeing said late Wednesday that it did not have a comment on the vote results.

The offer would have raised wages for IAM members at Boeing by 35 percentage points over the four-year life of the contract, with an immediate 12% raise. It would also have paid them a $7,000 signing bonus, increased contributions to union members’ retirement accounts and provided some job security, with the promise that the company’s next commercial jet would be built at a unionized factory rather than a new, non-union plant.

But the ratification is not certain. Union leadership stopped short of endorsing the offer, saying only that it “includes several key improvements” and that “it warrants presenting to the members and is worthy of your consideration.”

The previous tentative agreement that had been recommended by union leadership was almost unanimously rejected by rank-and-file members, sparking the start of the start of the strike on September 13.

Among the major issues for many members was the loss of a traditional pension plan. Membership narrowly gave up the pension in 2014 after the company threatened to build the 737 Max and 777X at non-union facilities. The loss of the pensions, at a time when Boeing was doing well financially, sparked deep resentment that continues to this day.

While the proposed contract achieved many of the union’s bargaining goals, and did provide for improved retirement benefits, it did not restore the traditional pension plan. Holden said Wednesday that issue is a “big sticking point for many of our members.”

“This membership has gone through a lot,” he said. “There are some deep wounds that were (created) out of some take aways and concessions, threats of job loss. Our members haven’t forgotten that.”

The rejected agreement would have raised Boeing’s labor costs by more than $1 billion annually, according to an analysis from Seth Seifman, an aerospace analyst at JPMorgan Chase.

Boeing has already announced plans to cut its global workforce of 171,000 employees by about 10%, or 17,000 jobs. The cost savings from those cuts could more than offset the increased cost of the wage package, Seifman said.

But Boeing desperately needed to reach a deal to end the strike. According to an estimate from Standard & Poor’s, the strike is costing the company $1 billion a month on top of its ongoing losses.

Earlier Wednesday, Boeing reported its third-quarter net loss surged to $6.2 billion from $1.6 billion a year earlier. And that period included only a limited impact on results from the strike, as the work stoppage did not start to affect aircraft deliveries, and thus company revenue, until the final days of the three-month period.

Boeing’s new CEO, Kelly Ortberg, said Wednesday that the company is at a crossroads and needs a fundamental change in its culture to stabilize its business. He has said he wants to reset the relationship between management and the union.

“First and foremost on everybody’s mind today is ending the IAM strike,” Ortberg told investors in a call after the earnings report. “We have been feverishly working to find a solution that works for the company and meets employees’ needs.”

The strike is only one of the problems dogging the company over the last six years, during which it has run up core operating losses of nearly $40 billion and seen its long-term debt climb to $53 billion. It is at risk of having its credit rating downgraded to junk bond status for the first time in its history.

Boeing’s problems started with two fatal crashes of the Max in late 2018 and early 2019, which led to a 20-month grounding of the company’s best-selling jet. It was then hit by canceled orders for new planes in 2020 when the pandemic caused a sharp plunge in demand for travel and massive losses at the world’s airlines.

In January this year, a door plug blew off an Alaska Airlines’ 737 Max jet shortly after takeoff. Although no one was seriously injured, the incident sparked numerous federal investigations and questions about the quality and safety of Boeing jets. One federal probe found that the plane had left a Boeing factory without the four bolts needed to hold the door plug in place.

The Federal Aviation Administration ramped up its oversight of the company, a step that will slow Boeing’s ability to increase production of the Max to the levels that it would need to return to profitability.

Despite recent issues, Boeing remains a key component in the US economy. It is America’s largest exporter, with an estimated annual contribution of $79 billion to the economy, supporting 1.6 million jobs directly and indirectly at 10,000 suppliers spread among all 50 states. Some of those suppliers have already been laying off workers due to the strike.

Fortunately for Boeing, it is not likely it will be forced out of business by its current financial crisis. Boeing’s place as part of a duopoly, along with European rival Airbus, essentially ensures its survival.

Boeing and Airbus are the only companies that make the full-size jets the global airline industry needs, and both companies have massive backlogs in orders. Any airline that canceled its Boeing orders and shifted to Airbus would need to wait at least four or five years to receive any aircraft from the European giant.

This story has been updated with additional reporting and context.