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Boeing factory workers voted on Wednesday to reject the aircraft maker’s latest offer and stay on the picket line, dealing a blow to the new chief executive’s plan to stabilise the business.
Among members of the International Association of Machinists and Aerospace Workers District 751 who voted, 64 per cent rejected the latest deal. Management had increased a pay rise offer to 35 per cent over four years and improved proposals on retirement benefits.
The union’s 33,000 members in Washington state have been on strike for almost six weeks. The vote pushes back the date that Boeing can recommence making most of its commercial jets and begin repairing its finances. “The strike continues,” the union said.
Ending the strike is critical to Boeing’s recovery, said Bank of America analyst Ron Epstein.
“This rejection adds further uncertainty, costs and recovery delays,” he said. “We anticipate further concessions of wages will be required for a deal to pass.”
Boeing declined to comment on the vote.
Chief executive Kelly Ortberg said earlier on Wednesday that ratification of a contract and ending the strike was a critical part of his plan to stabilise the company. One analyst has estimated the strike is costing Boeing $50mn a day.
Union members last month voted 96 per cent in favour of going on strike, rejecting a first tentative agreement negotiated by IAM District 751’s bargaining committee that offered a 25 per cent pay rise.
Wages of Boeing factory workers have risen just 4 per cent over the past eight years, while inflation has skyrocketed. Many workers are still angry over a bruising fight in 2014 that cost union members their traditional defined-benefit pensions.
“This contract struggle began over 10 years ago when the company over-reached and created a wound that may never heal for many members,” said IAM District 751 president Jon Holden. “We have prepared for years to bring this membership back to a position of power and leverage, and we are there.”
While the latest offer included “tremendous gains”, he said, “we have not achieved enough to meet our members’ demands”.
Acting US labour secretary Julie Su helped broker the latest offer. Besides a 35 per cent pay increase, it would have improved retirement benefits, without restoring the defined-benefit pension, which some workers had demanded and Boeing strongly opposed. It also included a one-time $7,000 bonus and ongoing performance bonuses.
Ben Tsocanos, aerospace director at S&P Global Ratings, said the rejection raised the risk of a protracted strike if the obstacle was the reinstatement of the defined-benefit pension. “A longer strike delays Boeing’s recovery and increases financial pressure on the company and its [credit] rating,” he said in a note.
Boeing, which is one notch above junk with all three rating agencies, has said it prioritises maintaining an investment-grade rating.
The vote came the same day that Boeing reported a $6bn net loss in the third quarter and Ortberg laid out his plan for a turnaround.
Ortberg said ending the strike was the first step to stabilising the business, which has burnt $10bn in cash this year, and that he was “very hopeful that the package we put forward will allow our employees to come back to work”.
Boeing plans to cut 17,000 jobs over the coming months as it tries “to align [the workforce] with our financial reality”.
Boeing shares were down 2 per cent in midday trading on Thursday to $153.80.
Additional reporting by Philip Georgiadis
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