By Niraj Chokshi
Earlier this week, Boeing’s largest union rejected a tentative labor agreement decisively, prolonging a detrimental strike and intensifying the financial challenges facing the company, which just hours prior had disclosed a $6.1 billion loss.
The proposed contract, which marks the second rejection by workers, faced opposition from 64% of those who voted, as reported by the International Association of Machinists and Aerospace Workers, which represents around 33,000 workers but did not specify the number of votes cast on Wednesday.
“We have a lot more to accomplish. We will strive to return to the negotiating table and advocate for our members’ demands as swiftly as possible,” stated Jon Holden, president of District 751 of the union, which encompasses the majority of the workers and has taken the lead in the discussions. He conveyed this message at the union’s Seattle headquarters, where members chanted, “Fight, fight.”
Boeing chose not to comment on the voting outcome, which poses a setback for the company’s new CEO, Kelly Ortberg, who is working to mend its image and business strategies explained earlier that day. In his statements to employees and investors, Ortberg mentioned that Boeing needed to implement a “fundamental culture change” to stabilize operations and enhance performance.
“Our leaders, including myself, need to be deeply involved with our operations and the teams developing and manufacturing our products,” he remarked. “We must be present on the factory floors, in the back shops, and in our engineering facilities. We need to be aware of what’s taking place, not only in terms of our products but also regarding our workforce.”
Ortberg shared these insights alongside the company’s quarterly financial results, which revealed a loss exceeding $6.1 billion. This month, Boeing also announced intentions to reduce its workforce by approximately 10%, translating to 17,000 jobs. The company has additionally disclosed plans to raise up to $25 billion by issuing debt or stock over the next three years to evade a harmful downgrade to its credit rating. The strike is draining the company of tens of millions of dollars daily, based on varying assessments.
Negotiations have proven contentious. The strike initiated on September 13 after 95% of workers voted against a previous contract proposal that had been endorsed by union leaders and Boeing. Later that month, the company presented what it labeled its “best and final” offer, giving workers mere days to accept or decline; however, union leaders never conducted a vote. Eventually, Boeing withdrew the offer, leading to the collapse of discussions this month.
The two parties reached the now-rejected agreement only after intervention from the Biden administration. Senior officials within the administration had been engaging closely with both Boeing and the union in recent months, following President Joe Biden’s directive. Last week, Julie Su, the acting labor secretary, traveled to Seattle to meet with both company executives and union representatives. On Wednesday, Holden indicated his intention to request the White House to persist in assisting the parties in reaching a resolution.
Boeing holds significant importance for the United States, serving as both an economic driver and a representation of manufacturing excellence. Employing nearly 150,000 individuals nationwide — nearly half in Washington state — it stands as one of the largest exporters in the nation. The company also manufactures military jets, rockets, spacecraft, and Air Force One.
Under the proposed contract, workers would have received cumulative raises close to 40% over four years, a marked increase over the previously rejected offer, nearing the initial demands of the union. The proposal included a one-time bonus of $7,000 and additional contributions to retirement plans. It also aimed to maintain an incentive bonus program that the initially rejected proposal sought to eliminate.
The average annual salary for Boeing machinists is approximately $75,000. Over the past decade, the workforce has benefited from an 8% increase under the union contract, along with over $4 per hour in added cost-of-living adjustments, as per the company’s data. Federal statistics indicate that consumer prices in the Seattle region have surged by more than 40% in the last ten years.
However, the contract did not restore a defined-benefit pension plan that had been frozen a decade ago — a critical concern for numerous union members. Many workers have expressed frustration over this loss for years, with some feeling that Boeing had pressured them into agreeing to the pension freeze. There has also been resentment directed at the leaders of the union’s parent organization, who scheduled the vote in a manner perceived to favor the approval of the offer, leading to a rule change that restricted the power to schedule votes to local union chapters.
“There are some deep-seated grievances,” Holden told the media after revealing the voting results. He also noted that the union might consider exploring what he termed hybrid defined-benefit plans in future negotiations.
The rejection of the new contract occurs as Boeing seeks to recover from a crisis that was reignited when a panel detached from a 737 Max jet during an Alaska Airlines flight in January, raising renewed concerns about the quality and safety of Boeing’s aircraft. Five years prior, two tragic Max crashes resulted in stringent global regulations that grounded the plane for nearly two years.
Following the January incident, the Federal Aviation Administration restricted production of the Max, Boeing’s top-selling aircraft. Since then, the company has increased inspections, enhanced training for new employees, started to streamline procedures, and curtailed out-of-sequence tasks.
The defeat of the contract is also detrimental news for the numerous suppliers of the manufacturer. Spirit AeroSystems, which fabricates the 737 Max fuselage and has agreed to be acquired by Boeing, recently announced plans to furlough around 700 employees starting next week due to the ongoing strike.
The contract currently under negotiation would replace one that was established in 2008 and extended multiple times. That agreement was reached only after a two-month strike that led to a revenue decline of over $6 billion and postponed the delivery of more than 100 aircraft that year, as Boeing reported at the time.
