Union members reject agreement with Boeing and extend strike

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The strike by 33,000 Boeing workers continues after rank-and-file union members rejected an offer from the company in a vote on Wednesday and decided to stay at the picket lines instead.

Members of the International Association of Machinists voted 64% against the deal, the union announced late Wednesday. While that was less than the 95% who rejected an earlier offer, the vote fell far short of the simple majority needed to end the strike.

“Our members deserve more,” said Jon Holden, president of Boeing’s largest IAM location and its chief negotiator. “They have been vocal, and we will come back to the table to try to get these things done.”

Boeing said late Wednesday that it had no comment on the voting results.

The offer would have increased IAM members' wages at Boeing by 35 percentage points over the four-year contract period, with an immediate 12% increase. It would also have paid them a $7,000 signing bonus, increased contributions to union members' retirement accounts and provided some job security, with the promise that the company's next airliner would not be built in a union factory rather than a new one unionized plant would be built.

However, ratification is not certain. Union leadership declined to endorse the offer, saying only that it “includes several important improvements” and that “it warrants being presented to members and is worthy of your consideration.”

The previous tentative agreement, recommended by union leadership, was almost unanimously rejected by the rank and file, triggering the start of the strike on September 13th.

One of the biggest challenges for many members was the loss of a traditional retirement plan. Membership narrowly missed out on pensions in 2014 after the company threatened to build the 737 Max and 777X in non-union facilities. At a time when Boeing was doing well financially, the loss of pensions caused deep anger that continues to this day.

While the proposed contract achieved many of the union's collective bargaining goals and provided improved pension benefits, it did not restore the traditional pension plan. Holden said Wednesday that the issue was “a major sticking point for many of our members.”

“This membership has been through a lot,” he said. “There are some deep wounds that have arisen from some of the takeaways and concessions and the threat of job losses. Our members have not forgotten that.”

According to an analysis by Seth Seifman, the rejected agreement would have increased Boeing's labor costs by more than $1 billion annually Aerospace Analyst at JPMorgan Chase.

Boeing has already announced plans to reduce its global workforce of 171,000 employees by about 10%, or 17,000 jobs. The cost savings from these cuts could more than offset the increased cost of the pay package, Seifman said.

But Boeing urgently needed to reach an agreement to end the strike. According to a Standard & Poor's estimate, the strike is costing the company $1 billion a month in addition to its ongoing losses.

Boeing reported earlier Wednesday that its third-quarter net loss widened to $6.2 billion from $1.6 billion a year earlier. And this period had only a limited impact on the results of the strike, as the work stoppage only affected aircraft deliveries and therefore company sales in the final days of the three-month period.

Boeing's new CEO Kelly Ortberg said Wednesday that the company is at a crossroads and needs a fundamental change in its culture to stabilize its business. He said he wanted to reshape the relationship between management and the union.

“Today, everyone’s main concern is ending the IAM strike,” Ortberg told investors in a phone call after the earnings report. “We worked feverishly to find a solution that worked for the company and met the needs of employees.”

The strike is just one of the problems the company has faced over the past six years, during which it posted core operating losses of nearly $40 billion and its long-term debt soared to $53 billion. It risks having its credit rating downgraded to junk bond status for the first time in its history.

Boeings The problems began with two fatal Max crashes in late 2018 and early 2019 that led to a 20-month grounding of the company's best-selling jet. Then in 2020, canceled orders for new aircraft occurred as the pandemic led to a sharp collapse in travel demand and massive losses for the world's airlines.

In January of this year, a door plug on an Alaska Airlines 737 Max jet exploded shortly after takeoff. Although no one was seriously injured, the incident sparked numerous federal investigations and questions about the quality and safety of Boeing jets. A federal investigation found that the plane left a Boeing factory without the four screws needed to secure the door stopper.

The Federal Aviation Administration has increased its oversight of the company, a move that will slow Boeing's ability to increase production of the Max to the levels needed to return to profitability.

Despite recent problems, Boeing remains a key component of the U.S. economy. It is America's largest exporter, contributing an estimated $79 billion annually to the economy and directly and indirectly supporting 1.6 million jobs at 10,000 suppliers in all 50 states. Some of these suppliers have already laid off workers due to the strike.

Fortunately for Boeing, the current financial crisis is unlikely to put the company out of business. Boeing's place as part of a duopoly with European rival Airbus essentially ensures its survival.

Boeing and Airbus are the only companies making large-format jets that the global aviation industry needs, and both companies have huge backlogs. Any airline that cancels its Boeing orders and switches to Airbus would have to wait at least four or five years to receive planes from the European giant.

This story has been updated with additional reporting and context.