Boeing Co.'s (BA) production of its best-selling 737 MAX jet came to an abrupt halt early Friday as approximately 30,000 unionized workers walked off the job after overwhelmingly rejecting a proposed four-year contract. The strike, the first at the aerospace giant in 16 years, underscores mounting tensions between labor and management amid Boeing's ongoing financial and operational challenges.
The International Association of Machinists and Aerospace Workers (IAM) members voted decisively, with 94.6% rejecting the contract offer and 96% authorizing the strike. "This is about respect, addressing the past, and fighting for our future," said Jon Holden, president of the IAM's largest local at Boeing, as he announced the vote results late Thursday.
The proposed contract included a 25% wage increase over four years, a $3,000 signing bonus, and a pledge to build Boeing's next commercial jet in the Seattle area-provided the program launches within the contract term. Despite being described by union leadership as "the best contract we've negotiated in our history," the offer fell short of workers' demands for a 40% wage hike and reinstatement of annual bonuses.
Boeing, already grappling with severe output delays and heavy debt, expressed readiness to return to negotiations. "The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members," the company said in a statement. "We remain committed to resetting our relationship with our employees and the union."
The strike poses significant risks for Boeing's financial health. The company carries a debt load of $60 billion and hasn't reported an annual profit since 2018, amassing core operating losses exceeding $33 billion. Boeing's stock has lost nearly 38% of its value this year, erasing $58 billion in market capitalization. Shares fell an additional 2.8% in pre-market trading Friday.
Workers began assembling outside Boeing factories in the Seattle area shortly after midnight, chanting "Strike! Strike! Strike!" and holding placards reading "On Strike Against Boeing." James Mann, a 26-year-old employee in Boeing's wings division, voiced the determination shared by many. "I'm willing to strike for two months or even longer," he said. "Let's go as long as it takes to get what we deserve."
The walkout not only halts production of the 737 MAX but also threatens to disrupt the supply chain involving nearly 10,000 suppliers across all 50 states. Airlines awaiting deliveries of Boeing jets may face delays, potentially impacting their operations. Air India CEO Campbell Wilson noted that 737 MAX deliveries to his airline were already "delayed a little bit" due to regulatory scrutiny and supply chain issues.
Boeing's challenges extend beyond labor disputes. The company has been under intense scrutiny following a series of setbacks, including two fatal crashes of the 737 MAX in 2018 and 2019 that led to a 20-month grounding of the aircraft. More recently, a door panel blew off an Alaska Airlines 737 MAX mid-flight in January, prompting federal investigations and raising questions about manufacturing quality and safety protocols.
Newly appointed CEO Kelly Ortberg had urged union members to accept the contract to "secure our future together." In a message to employees, he acknowledged past grievances but emphasized the need to move forward. "I understand and respect that passion, but I ask you not to sacrifice the opportunity to secure our future together because of the frustrations of the past," Mr. Ortberg wrote.
Union members, however, remained steadfast in their demands. Past concessions, such as the loss of traditional pension plans and perceived job insecurity due to work shifts to non-union factories, fueled dissatisfaction. "We went through a period of 10 years with stagnated wages," Mr. Holden said. "Our members deserve a fair work-life balance."
The strike arrives amid a broader resurgence in labor activism across the U.S., as workers seek better compensation and working conditions in the face of rising inflation. "There were a lot of awesome wins in the labor movement, and I think that momentum is something that helped us, that brought confidence to our members," Mr. Holden noted, referencing recent successful strikes in other industries.
The Biden administration indicated its awareness of the situation. "We are in touch with both parties," White House Press Secretary Karine Jean-Pierre said Thursday. "We encourage both sides to negotiate in good faith and reach a strong contract."
Analysts warn that a prolonged strike could exacerbate Boeing's financial woes and delay its recovery. Jefferies analyst Chloe Lemarie pointed out that "a long strike poses a key risk for 737 MAX production." S&P Global Ratings echoed the concern, stating that an extended strike could impact Boeing's credit rating, which currently sits just one notch above junk status.
The last strike at Boeing in 2008 lasted 57 days, shuttering plants and costing an estimated $100 million per day in revenue. As negotiations remain at an impasse, both the company and its workers brace for an uncertain period ahead.
