Boeing factory workers have walked off the job for the first time in 16 years, halting manufacturing across the plane maker’s Seattle commercial jet centre after members of its largest union rejected a contract offer and voted to strike.
Members of the International Association of Machinists and Aerospace Workers, which represents 33,000 Boeing employees on the US West Coast, voted overwhelmingly to strike on Thursday in Seattle, with 94.6 per cent voting to reject the offer and 96 per cent supporting a strike. They downed tools officially at midnight local time.
While both parties have expressed a desire to resume negotiations, the strike adds to the strain on Boeing. The company was reeling from the fallout over quality concerns that spurred investigations, a customer revolt and an executive shake-up.
“This has been a long time coming. Our members spoke loud and clear tonight,” Jon Holden, president of IAM District 751, told union members and journalists. “Clearly, there were aspects of this agreement that weren’t good enough.”
By the time he finished speaking, chants of “strike, strike” had become deafening.
Boeing builds 737 Max jetliners at its Renton factory, near Seattle, and makes 777 and 767 models at its Everett site, north of the city. Mr Holden said Boeing’s offer did not compensate for 16 years of stagnated wages, higher out-of-pocket healthcare costs and the relocation of thousands of union jobs.
“There's a lot at stake here for our members, so I am proud of them,” he added. “And we’re going to get back to the table as quickly as we can.”
Boeing remains “committed to resetting our relationship with our employees and the union, and we are ready to get back to the table to reach a new agreement”, the company said in a statement.
Union members ignored a plea from new Boeing chief executive Kelly Ortberg, who has vowed to reset labour relations. Employees also bucked the recommendation of union leaders to accept terms that included a 25 per cent guaranteed wage increase over four years.
While that would is the largest pay increase to be offered by the plane maker, staff expected the rate to be far higher. They were also angered that the terms also eliminated an annual bonus.
Boeing has been in a financially challenging situation since a January 5 accident exposed deficiencies at its factories and forced it to reduce production. The company has been bleeding cash as a result, with its credit rating is hovering one step above speculative grade. It is also contending with a heavy debt load of $45 billion.
The rejection of the offer means Boeing and IAM District 751 will hold further talks in an effort to reach a deal that satisfies members of a union with a long history of activism. Cai von Rumohr, an analyst at TD Cowen, estimated that a 50-day strike, in line with previous action, could cut between $3 billion and $3.5 billion from Boeing’s cash flow.
Boeing employees will start to man picket lines outside about 30 company sites from California to Moses Lake, in eastern Washington state. Because the union said it was an unfair labour practices strike, a mediator will be assigned by the federal National Labour Relations Board, Mr Holden said.
The company said its offer was the best it could put forward, given the financial strain. Managers have been canvassing other staff this week to see whether they have the skills to replace striking IAM members temporarily.
Before the strike began, IAM members outside the Renton factory voiced their frustration over wages that have stagnate under a deal struck in 2014 that also eliminated pensions. They were also angered that Boeing kept a provision that forces hourly employees to be work for six years before reaching the maximum pay categories.
“I’m working stupid amounts of overtime just to get by,” said Zachary Haley, a 737 quality assurance inspector who has worked for Boeing for five years.
Boeing is at risk of losing its investment-grade credit rating as the embattled plane maker faces the prospect of a drawn-out strike.
The credit score on Boeing’s unsecured debt has stood at Baa3 with Moody’s Ratings since April. Moody’s said in a statement on Friday that it is reviewing the ratings for a possible downgrade and that it “will assess the strike’s duration and impact on cash flow and the potential equity capital raising Boeing may undertake to bolster its liquidity”.
