Striking Boeing workers demand better contract

(SEATTLE) — Boeing workers protested Friday in the Pacific Northwest instead of building planes after overwhelmingly rejecting a proposed contract that would have raised their wages by 25 percent over four years.

The strike by 33,000 machinists will not disrupt airline flights in the near future, but it is expected to halt production of Boeing’s best-selling jetliners, marking a further setback for a company already facing billions of dollars in financial losses and a tarnished reputation.

The company said it is taking steps to conserve cash while its CEO looks for ways to deliver a contract that unionized workers at the plant will accept.

On Friday evening, the Federal Mediation and Conciliation Service announced that it would convene new negotiations early next week.

“FMCS has been in contact with IAM and Boeing to support their return to the negotiating table and commends the parties for their willingness to meet and work toward a mutually acceptable resolution,” the agency said in a statement.

Boeing shares fell 3.7% on Friday, bringing their year-to-date decline to nearly 40%.

The strike began shortly after a regional chapter of the International Association of Machinists and Aerospace Workers reported that in a vote Thursday, 94.6 percent of participating members rejected a contract offer that the union’s negotiating committee had itself approved, and 96 percent voted to strike.

Shortly after midnight, striking workers gathered outside the Boeing plant in Renton, Washington, holding signs that read, “Have you seen the real estate prices?” Car horns honked and a tape recorder played songs including Twisted Sister’s “We’re Not Gonna Take It” and Taylor Swift’s “Look What You Made Me Do.”

Many employees interviewed by the press said the pay offer was inadequate given the rising cost of living in the Pacific Northwest. John Olson said his salary had increased only 2 percent during his six years at Boeing.

“The last contract we negotiated was 16 years ago, and the company is basing its wage increases on what it was 16 years ago,” said the 45-year-old toolmaker. “They can’t even keep up with inflation.”

Others said they were unhappy with the company’s decision to change the criteria used to calculate annual bonuses.

Machinists earn an average of $75,608 a year, not including overtime, and that amount would have risen to $106,350 by the end of the proposed four-year contract, according to Boeing.

Under the rejected contract, workers would have received a $3,000 lump sum payment and reduced health care costs, in addition to wage increases. Boeing also met a key union demand by promising to build its next new plane in Washington state.

The offer, however, fell short of the union’s initial demand for a 40 percent wage increase over three years. The union also wanted to restore traditional pensions, which were eliminated a decade ago, but settled for an increase in Boeing’s new contributions to employees’ 401(k) retirement accounts to $4,160 per worker.

Jon Holden, president of IAM District 751, said the union would survey its members on what issues they want to focus on when negotiations resume. Boeing responded to the strike announcement by saying it was “prepared to return to the bargaining table to reach a new agreement.”

“The message was clear: the tentative agreement we reached with IAM management was not acceptable to the membership. We remain committed to rebuilding our relationship with our employees and the union,” the company said in a statement.

Boeing Chief Financial Officer Brian West, speaking at an investor conference in California on Friday, said the company was disappointed to have reached a deal with union leaders only to see it rejected by rank-and-file workers.

During the strike, Boeing will lose a major source of cash: Airlines pay most of the purchase price when they take delivery of a new plane. West said Boeing, which has about $60 billion in total debt, is now looking for ways to conserve cash. He declined to estimate the financial impact of the strike, saying it would depend on how long the strike lasts.

Before the strike, new CEO Kelly Ortberg gathered feedback from workers during plant visits, and he “is already working to get an agreement that addresses their concerns,” West said.

White House spokeswoman Karine Jean-Pierre said Biden administration officials have reached out to Boeing and the union.

“We believe they should negotiate in good faith and work to reach an agreement that gives employees the benefits they deserve. It would also make the company stronger,” she said.

Boeing hasn’t had much positive news this year: A panel blew off and left a gaping hole in one of its jetliners in January, and NASA left two astronauts in space instead of sending them home aboard a problem-plagued Boeing spacecraft.

Learn more: Is there a future for Boeing’s Starliner after its mission failure?

The striking machinists assemble the 737 Max, Boeing’s best-selling airliner, as well as the 777 jet and the 767 cargo plane. The strike is not expected to halt production of Boeing’s 787 Dreamliners, which are built by nonunion workers in South Carolina.

The strike poses another challenge for Ortberg, who was tasked six weeks ago with turning around a company that has lost more than $25 billion over the past six years and is lagging behind European rival Airbus.

Ortberg tried in the final stretch to salvage a deal that had won unanimous support from union negotiators. He told machinists Wednesday that “no one wins” from a walkout and that a strike would jeopardize Boeing’s recovery and raise more doubts about the company in the eyes of its customers.

“It’s no secret to Boeing that our business is going through a difficult time, in part because of our own past mistakes,” he said. “Working together, I know we can get back on track, but a strike would jeopardize our shared recovery, further erode trust with our customers, and harm our ability to shape our future together.”

Ortberg was in a difficult situation, union leader Holden said, because machinists were bitter about stagnant wages and concessions they had made since 2008 on pensions and health care to prevent the company from moving jobs elsewhere.

“This is about respect, this is about the past and this is about fighting for our future,” Holden said in announcing the strike.

The suspension of airplane production could prove costly for Boeing, depending on how long this strike lasts. Boeing’s last strike, in 2008, lasted eight weeks and cost the company about $100 million a day in deferred revenue. A 1995 strike lasted 10 weeks.

Before the tentative deal was announced Sunday, Jefferies aerospace analyst Sheila Kahyaoglu had estimated that a strike would cost the company about $3 billion, based on the 2008 strike, plus inflation and current aircraft production rates.

AJ Jones, a Boeing quality inspector for 10 years, was among the workers who protested on a street corner near Boeing’s Renton campus. He said he was glad union members decided to demand a pay raise.

“I don’t know how long this strike is going to last, but however long it takes, we’re going to be here until we get a better deal,” Jones said.

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Koenig reported from Dallas. Darlene Superville in Washington, D.C., contributed to this report.