Boeing faces the prospect of losing billions more dollars in the fourth quarter and may need to accelerate efforts to raise cash after machinists on 23 October voted down another of the company’s contract offerings.
Still, some analysts do not view the setback as devastating, saying Boeing has the means to sweeten its offer and that a deal with the International Association of Machinists (IAM) will yet materialise.
Credit rating firm Moody’s said on 24 October that the vote “has little bearing” on its ongoing review of Boeing’s credit rating.
“We believe that an agreement will be reached with financial terms that Boeing can bear and that the company could accommodate the IAM’s pre-strike objective of a 40% compensation increase, but not the pension demand,” Moody’s says.
Its credit review depends not so much on the financial impact of the new contract but rather on the amount of fresh financing Boeing obtains and how quickly it can accelerate production following the strike.
The aerospace industry was optimistic that the 33,000-strong union would have approved Boeing’s latest offer, which would have provided a 35% pay raise over four years.
But members voted down the proposal by a 64% margin on 23 October. The union entered negotiations seeking a 40% bump and reinstatement of a pension. Boeing has not yet offered to reinstate that retirement plan.
“We delivered a proposal that provided unprecedented improvements for our production and maintenance teammates in the Pacific Northwest. We are disappointed in the result of the vote,” Boeing Commercial Airplanes chief executive Stephanie Pope said in an email to staff. “We have overcome challenges in the past, and we will do so again as we define a stronger future together.”
IAM members went on strike on 13 September. Boeing’s 737, 767 and 777 production has since been stopped.
“After 10 years of sacrifices, we still have ground to make up, and we’re hopeful to do so by resuming negotiations promptly,” IAM District 751 president Jon Holden said after the latest vote. “This is workplace democracy – and also clear evidence that there are consequences when a company mistreats its workers year after year.”
Union members torpedoed the deal the same day Boeing said it lost $6.2 billion in the third quarter. Financial firm Jefferies estimates the strike is costing Boeing $1.3 billion monthly in lost revenue – largely due to fewer 737 sales, but also from ongoing cash payments.
Boeing ended October with $10 billion in cash and equivalents – about the minimum analysts think the company needs to operate – but recently disclosed plans to raise up to $25 billion in fresh financing.
With the strike ongoing and Boeing facing $4 billion of debt due in the first half of next year, “the plan to address the balance sheet is front and centre”, says a 24 October JP Morgan report.
