Boeing factory strike stretches over a month as pressure mounts on CEO

It’s been a little over a month since we reached 30,000 people. boeing The mechanics quit their jobs after the preliminary contract was overwhelmingly rejected. Since then, costs and tensions have only increased.

The strike puts more pressure on Boeing’s new CEO, Kelly Ortberg, who was brought in over the summer to help resolve various problems at the plane maker. The strike is costing Boeing more than $1 billion a month, according to estimates by S&P Global Ratings, and caps an already difficult year that began with a near-catastrophic rupture of a 737 Max’s door plug. This occurred six years after the first of two Max fatalities. Renowned manufacturers are always in a state of crisis.

The union and the company remain in an impasse, with plane production halted at factories in the Seattle area and elsewhere, draining Boeing of cash. Last week, Boeing withdrew a sweet contract offer that the union had rejected as a lack of negotiation.

In the weeks leading up to the initial vote, Boeing officials signaled to airline customers that they were open to a deal, said the people, who asked not to be identified because the conversations were private.

But that optimistic outlook did not pan out as workers on September 13 voted 95% against the first interim collective agreement.

“They’re going to have to increase their offer, there’s no question about that,” said Harry Katz, a professor of collective bargaining at Cornell University’s School of Industrial and Labor Relations. But he said a return to the pension system, one of the union’s demands, was unlikely and predicted the strike could last for another two to five weeks.

The process to end the strike has become increasingly difficult, with federal government-mediated talks collapsing in midweek.

Boeing announced Thursday that the International Machinery and Aerospace Workers Union filed an unfair labor practice complaint with the National Labor Relations Board, accusing it of negotiating in bad faith and misrepresenting the aircraft maker’s offer.

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

“CEO Ortberg has been given an opportunity to do things differently, rather than threaten to crush anyone who defies his tired labor relations, as he has in the past,” he said in a statement. ” he said. “Ultimately, it is our members who decide whether a negotiated contract offer is accepted. They want a negotiated solution and they want their needs met. .”

Boeing’s unionized machinists are not receiving paychecks and lost their company-sponsored health insurance in late September. But unlike during the last Boeing plant strike in 2008, contract work is increasing in the Seattle area to make up for the labor shortage. The union’s bulletin board posts job openings for food delivery service drivers, warehouse workers, and more.

After the stock market closed on Friday, Ortberg said the company plans to reduce its workforce by about 10% globally “over the coming months,” including layoffs of executives, managers and employees. Ta.

He also told staff that Boeing will stop producing commercial 767 freighters when its backlog expires in 2027, and that deliveries of the 777X will be delayed by another year to 2026.

The unexpected job cuts coincided with preliminary results showing deeper losses. Boeing said it expects a loss of nearly $10 a share in the third quarter, with charges of about $5 billion in its commercial and defense divisions. The company has not made an annual profit since 2018. Ortberg will face investors on October 23rd at his first full-scale financial results conference as CEO.

Richard Aboulafia, managing director of Aerodynamic Advisory, said: “The problem is that once production of the 737 gets off the ground, all the funding issues will be solved, but we’re not going to solve them to make that happen.” That means no,” he said. “They’re laying off a lot of people who could make that (consistent production) happen. It’s like they’re burning down their own house.”

Aboulafia estimates that the labor involved in the final assembly of the aircraft accounts for about 5% of the cost of the aircraft.

Ortberg is now tasked with raising money and stemming the bleeding as the company’s losses mount. Boeing stock had fallen 42% this year through Friday’s close, its steepest decline since 2008.

“We are committed to achieving and innovating in areas that are core to who we are, rather than spreading ourselves across too many initiatives, which leads to underperformance and underinvestment,” Ortberg said in a memo to staff Friday. We need to focus our resources.” .

S&P Global Ratings last week said the suspension of production of Boeing’s best-selling 737 Max, 767 and 777 planes would cost the company more than $1 billion a month, putting the company at risk of being downgraded to junk status. he warned. The estimate includes previously announced cost reductions, including furloughs, a hiring freeze and halting orders for most of the affected aircraft.

Ron Epstein, an aerospace analyst at Bank of America, said in a note Friday that Boeing faces “quality, labor relations, program execution, and cash burn issues that could lead to continued bankruptcy.” “It seems to be creating a loop cycle.” He said Boeing’s early financial release on Friday indicated that an equity raise of up to $15 billion was likely in the works.

The announced job cuts come after Boeing and the rest of the aerospace supply chain grappled with hiring and training new machinists and other professionals following pandemic-era acquisitions and layoffs of thousands of employees. It was done.

Boeing’s instability could also spill over to its suppliers. Boeing 737 aircraft manufacturer Spirit Aero SystemsA spokesperson said the company is considering furloughing employees in its cost-cutting contingency plan, adding that no decisions have been made yet. Boeing is in the process of acquiring the company.

“They’re probably talking to us about delivering cost savings,” Aboulafia said of Boeing’s latest cost cuts. “When did something that didn’t work become impossible to try again?”