Boeing Strives to Quell Strike

Boeing and the union representing 33,000 striking workers have reached a tentative agreement on a new contract, with Boeing agreeing to a 35% pay raise over four years. However, the emergence of the preliminary agreement does not mean that Boeing's troubles have been eased. The market's most pressing concern now is that the rising manufacturing costs and declining profit margins are gradually undermining Boeing's market share. If the new CEO does not have the sufficient capability to reverse the current downturn, the strike is just one chapter in Boeing's survival crisis.

On October 19th, local time, the "International Association of Machinists and Aerospace Workers" (IAM) announced to its 33,000 striking members that a preliminary agreement had been reached with the aircraft manufacturer Boeing. The IAM stated that the agreement includes provisions for Boeing to increase wages by 35% over the four-year term of the contract.

In a statement on its website, the IAM said that in addition to the pay raise, the agreement guarantees a minimum bonus of 4% per year, and an additional $7,000 bonus if the workers approve the contract.

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However, it is not certain that the striking workers will approve this tentative agreement. It is reported that the agreement still needs to be approved by a majority of IAM members before it can take effect, and workers will return to their jobs. The vote is scheduled to take place on October 23rd, local time.

Last month, after employees overwhelmingly rejected an agreement, Boeing made two higher offers. In a statement, Boeing said, "We look forward to our employees voting on the negotiated proposal."

Analysis suggests that the successful negotiation is not unrelated to the intervention of the White House. Recently, the White House sent Acting Labor Secretary Julie Su to Seattle to support the collective bargaining process. She had several meetings with IAM and Boeing's new CEO Kelly Ortberg to break the deadlock.

The timing of the strike chosen by Boeing workers coincides with the timing of the strike chosen by dockworkers on the East Coast of the United States.

This strike led by IAM is the first major labor dispute at Boeing in 16 years. The last strike by IAM members occurred in 2008 and lasted for 54 days.

So far, the strike has lasted for five weeks. On September 13th, local time, about 33,000 workers at Boeing's assembly plants in the Seattle and Portland areas went on strike to express dissatisfaction with a new labor agreement reached by Boeing with its largest union, the "International Association of Machinists and Aerospace Workers."

As the strike enters its sixth week, the pressure on Boeing is increasing. Previously, as the strike entered its fifth week, Boeing directly announced layoffs, amounting to about 10% of the current total number of employees, involving approximately 170,000 positions, and also postponed the launch of the new large aircraft model 777 X to 2026.On the same day that the news of layoffs was announced, Boeing stated that it expects a significant loss in the third quarter, with a $3 billion loss in its commercial aircraft business and a $2 billion loss in its defense, space, and security business. Over the past five years, Boeing's losses have exceeded $25 billion.

Some analysts estimate that Boeing, which has already been hit hard by regulatory and legal crises, could lose up to $1 billion per week due to the strike. However, after the company took cost-cutting measures, other analysts calculated the loss to be slightly over $1 billion per month. The strike also puts the company's credit rating at risk.

Meanwhile, Boeing has taken preliminary steps to raise funds to support its operations and maintain its investment-grade credit rating. The company has reached a $10 billion credit loan agreement with banks and has submitted an application for a plan to raise up to $25 billion in funds over the next three years.

There is also analysis suggesting that even if the current agreement is approved, it is unknown whether Boeing can appease workers' long-standing dissatisfaction with Boeing's negotiation tactics. For example, Boeing has threatened to move its passenger aircraft production out of the Seattle area unless aircraft mechanics agree to concessions, including the loss of pensions.

The emergence of a preliminary agreement does not mean that Boeing's difficulties have been resolved. In fact, the potential increase in labor costs could very well plant a time bomb for Boeing's future.