By Joe Brock and David Shepardson
SEATTLE (Reuters) -Boeing negotiators and unions will return to the bargaining table early next week, U.S. federal mediators said on Friday, as the two sides try to end a strike that threatens the plane maker’s turnaround.
The U.S. Federal Mediation & Conciliation Service said late Friday it would convene the parties with a federal mediator after speaking to both sides, less than a day after union members voted overwhelmingly to reject Boeing’s (NYSE:) contract offer. rejected and went on strike.
“The parties will resume meetings early next week,” the statement said.
More than 30,000 members of the International Association of Machinists and Aerospace Workers (IAM), which produces Boeing’s best-selling 737 MAX and other aircraft in the Seattle and Portland areas, voted in favor of their first full contract in 16 years, with 94.6% voting in favor rejected Boeing’s bid and 96% are in favor of a strike. The employees promised to fight for a better wage offer than the company had made.
Shortly after midnight, striking workers on the West Coast began gathering outside Boeing factories in the Seattle area.
Chief Financial Officer Brian West said Boeing wants to return to the negotiating table, saying the strike will make it harder for the planemaker to meet its production target for the 737 MAX plane and stabilize its supply chain. The association also wanted to get back to the table as quickly as possible.
“This is about fighting for our future,” said Jon Holden, who led negotiations for Boeing’s largest union, before announcing the results of the strike vote on Thursday.
Boeing declined to comment on the mediator’s comments and the union was not immediately available for comment.
Workers have been protesting all week at Boeing factories in the Seattle area, where Boeing’s MAX, 777 and 767 jets are assembled. On Friday night, members cheered in the union hall and chanted “Strike! Strike! Strike!”
Boeing shares fell 3.7% on Friday. So far this year, the stock is down nearly 40%, reducing the company’s market value by about $58 billion. Boeing’s corporate bonds also lost value, with spreads between their yields and comparable U.S. government bonds widening sharply.
A prolonged strike could further damage Boeing’s finances, which are already burdened by $60 billion in debt. The aircraft manufacturer must generate sufficient cash flow to meet the debt payments. A strike would also weigh on airlines that fly Boeing jets and suppliers that manufacture parts.
Moody’s (NYSE:) revised the aircraft maker’s rating, while Fitch said a prolonged strike could increase the risk of a rating downgrade. On Thursday, S&P Global Ratings said a prolonged strike could hurt Boeing’s overall rating, which is one notch above junk status. A credit downgrade could increase Boeing’s debt issuing costs.
Boeing said it had offered workers everything it could and must now reach a deal to end the strike while it plans investments needed to replace its best-selling single-aisle models. CFO West said the company would be “laser-focused on taking action to save money,” adding that the strike “will jeopardize our recovery.”
New CEO Kelly Ortberg was brought in a few weeks ago to restore confidence in the aircraft manufacturer after a door panel blew off a 737 MAX plane in mid-air last January. He offered a contract that included a 25% wage increase over four years, far lower than the 40% the workers had demanded. Union leaders recommended approval of the contract, but angry members voted overwhelmingly to strike and fight for the original demand of a 40% wage increase and an annual bonus.
Union workers from a range of industries and companies, including major automakers, delivery services UPS and more, have recently secured double-digit raises, taking advantage of a tight labor market and demanding paychecks to fight inflation.
THE CHALLENGES OF BOEING
The proposed deal included a $3,000 signing bonus and a promise to build Boeing’s next commercial aircraft in the Seattle area, provided the program was launched within the contract term.
Equity research firm Melius Research showed that average employee compensation for the aerospace and defense companies it monitors grew 12% between 2018 and 2023. For Boeing it fell 6% and for Spirit Aerosystems, the maker of aerospace structures that Boeing wanted to acquire, it fell 19%.
‘AS LONG IT TAKES’
On Friday morning, crowds of striking workers began streaming toward six different entrances to the Boeing facility, honking their horns and raising their fists out the windows. There was a smile of appreciation when the donuts arrived.
“I am prepared to strike for two months or even longer. Let’s keep going as long as it takes to get what we deserve,” said James Mann, a 26-year-old who works in a wing division.
President Joe Biden’s administration was in contact with both parties, urging them to “negotiate in good faith an agreement that gives workers the benefits they deserve and makes the company stronger,” White House spokesperson Robyn Patterson said .
One Boeing supplier said companies can limit losses from the strike by using a Washington state program to provide some compensation to workers whose hours are cut. JPMorgan said Boeing can adjust the pace at which it takes material. “At the very least, a prolonged strike could impact suppliers’ growth expectations,” said analyst Seth M. Seifman.
The last strike by Boeing workers in 2008 closed factories for nearly two months, causing sales to drop by an estimated $100 million per day. According to TD Cowen, a 50-day strike could cost Boeing $3 billion to $3.5 billion in cash flow.
The planemaker has more than 4,700 orders for the 737 MAX aircraft, with Southwest Airlines (NYSE:), United Airlines and Lion Air the three largest customers lining up for deliveries, according to aviation data provider Cirium.
United Airlines CFO Michael Leskinen said Boeing was doing “much better” while delivery rates had stabilized. “There is the risk of the strike. I’m not going to give an opinion on that. That would certainly be a speed bump.”
Southwest, Cathay Pacific and flydubai said they were in contact with Boeing.
