96% Of Workers Walk Off: Is Boeing Headed For A $1.5 Billion Disaster?

By Alan Hume | Saturday, 14 September 2024 11:59 PM
Views 2.7K

Boeing's recovery is under threat as a labor strike that started just after midnight on Friday is set to impact aircraft deliveries, according to CFO Brian West.

The strike began after factory workers overwhelmingly rejected a new labor contract and walked off the job. The financial repercussions of the strike will depend on its duration, but it is expected to disrupt the production of Boeing's bestselling planes, including the 737 Max, which is manufactured in Renton, Washington.

As reported by CNBC, West expressed his concerns at a Morgan Stanley conference on Friday, stating, "The strike will impact production and deliveries and our operations and will jeopardize our recovery. So our immediate focus is to the laser-like focus on actions to conserve cash, and we will." West emphasized that Boeing's priority is to return to the negotiation table and "reach an agreement that's good for our people, their families, our community."

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However, West did not comment on whether the company could meet a production rate of 38 737 Max planes per month by the end of the year. Jefferies aerospace analyst Sheila Kahyaoglu had previously estimated that a 30-day strike could cost Boeing $1.5 billion. West confirmed that Boeing's immediate focus would be "on actions to conserve cash" and added that new CEO Kelly Ortberg would be working to restore relationships with the union.

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The labor dispute arose after Boeing and the International Association of Machinists and Aerospace Workers proposed a tentative labor agreement on Sunday. The agreement included a 25% wage increase over four years and improvements to health-care and retirement benefits. However, workers were seeking a 40% raise and argued that the proposed increase did not cover the rising cost of living.

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Workers in the Seattle area and in Oregon voted 94.6% to reject the proposal, and 96% voted in favor of a strike. The workers subsequently walked off the job after midnight on Friday. The last time Boeing machinists went on strike was in 2008, a work stoppage that lasted nearly two months.

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This potential production disruption adds to the challenges already facing the manufacturer. Boeing has been grappling with a series of issues, including struggles to ramp up production and restore its reputation following safety crises. A door plug blowout on a nearly new Boeing 737 Max 9 in January led the Federal Aviation Administration to bar Boeing from increasing output of its Max planes and to increase inspections at production plants, until the regulator is satisfied with its safety and quality procedures there.

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A spokeswoman for the FAA told CNBC on Friday that the agency will maintain its inspectors at Boeing facilities during the strike. This move underscores the gravity of the situation and the need for Boeing to swiftly resolve the labor dispute to ensure the company's recovery and the preservation of its reputation in the aviation industry.

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