Boeing and Union Achieve Tentative Agreement to Terminate Strike, Awaiting Ratification Vote

Boeing and the union representing its striking machinists have arrived at a tentative agreement. Union leaders believe this agreement should be put up for a ratification vote by members. This could potentially end the strike that has been ongoing for over a month.

Details of the Agreement

The International Association of Machinists and Aerospace Workers Local 751 released a statement on October 19th. They stated, "With the assistance of Acting U.S. Secretary of Labor Julie Su, we have received a negotiated proposal and resolution to end the strike. It warrants presenting to the members and is worthy of your consideration." Approximately 33,000 unionized workers of Boeing went on strike on September 13th. This happened after nearly 95 percent of the predominantly West Coast workers rejected Boeing's offer of a 25 percent pay increase over four years. The strike stopped the production of the company's 737 Max, as well as the 767 and 777 widebody aircraft. The company is estimated to have lost around $1 billion per month due to the labor action.

Key Improvements in the Tentative Deal

Union leaders have stated that the tentative deal includes "key improvements" over an earlier proposal from September 12th. These improvements are "aimed at resolving the strike." The latest proposal includes a 35 percent wage increase over four years, a $7,000 ratification bonus, and reinstated incentive payouts. It also includes improved 401k contributions, a $105 pension multiplier, and restored call-in provisions. Boeing's latest proposal, while making a number of concessions, does not include a dedicated pension plan for new members. This was a significant demand in previous negotiations. Instead, the proposal emphasizes enhanced 401k contributions, including a 100 percent company match up to 8 percent and a one-time $5,000 contribution for eligible members.

Upcoming Vote on the Proposal

The union has plans to hold a vote on the proposal on October 23rd. If approved by a simple majority of members, the tentative deal will be solidified into a contract and the strike will end. Union leaders are still finalizing the strike settlement agreement. They will present it along with additional contract details to members for their consideration ahead of Wednesday’s vote. They stated, "The future of this contract is in your hands." Boeing issued a statement on October 19th, saying, "We look forward to our employees voting on the negotiated proposal."

Impact of the Strike on Boeing

The strike began at a challenging time for Boeing, which has been trying to increase production after a series of safety incidents and increased regulatory scrutiny in recent years. Analysts have warned that a prolonged strike could lead to lasting financial impacts, while credit-rating agencies have warned of potential ratings downgrades. Shortly after the strike began in mid-September, Boeing announced a hiring freeze, a halt to nonessential spending, and hinted at the possibility of layoffs. This was an attempt to conserve cash and preserve the company’s long-term operations. Boeing also said it will temporarily release nonessential contractors and consultants, and pause employee retention programs, catered meals, and team events. As the strike continued into October, Boeing announced that it will cut around 17,000 jobs and further delay the launch of the 777X, a new model that is already several years behind schedule.

Financial Impact on Boeing

Boeing CEO Kelly Ortberg stated in an October 11th memo to employees, "Our business is in a difficult position, and it is hard to overstate the challenges we face together." This statement came on the same day that Boeing announced it expects to recognize negative impacts to its financial results when it reports third-quarter earnings on October 23rd. Boeing attributed the impacts to charges related to certain commercial and defense programs, as well as the ongoing strike. The company now projects revenues of $17.8 billion, an operating cash flow deficit of $1.3 billion, and a loss of $9.97 per share.

Bottom Line

The ongoing strike at Boeing and the tentative agreement reached with the union is a significant development in the labor industry. It showcases the power of collective bargaining and the potential for resolution even in the face of significant challenges. What are your thoughts on this situation? Do you think the agreement will be ratified and the strike will end? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.