Two weeks after 33,000 Boeing machinists went on strike, the company is bracing for financial impact.
The airplane maker has implemented cost-saving measures including a hiring freeze, temporary furloughs, leadership pay cuts and halted payments to most of its hired D.C. lobbying firms in an effort to reserve cash since machinists walked off the job shortly after midnight on Sept. 13.
Boeing and the International Association of Machinists (IAM) are set to meet Friday to negotiate but remain at odds on key issues including wage increases and pensions, putting additional strain on the company that has weathered intense scrutiny this year.
The strike will have cost the company, employees and suppliers a combined $1.4 billion through Sept. 27, according to a new estimate by the consulting firm Anderson Economic Group.
Nearly $1.1 billion of the total estimated cost has been borne by shareholders, according to the firm’s analysis, while the direct cost to Boeing employees is around $207 million.
“The company’s large backlog of orders, and the fact that it is losing both current production and future parts and service business, mean that Boeing shareholders are effectively incurring losses every day this strike continues,” said Patrick Anderson, principal and CEO of Anderson Economic Group.
“Boeing workers on strike are also losing, and as the strike goes on, more of Boeing’s suppliers will be forced to cut wages and hours.”
The second week of the strike was more costly than the first, “as is typical for major industrial strikes,” Anderson noted.
Costs totaled $572 million during the first week of the strike, according to an earlier analysis by Anderson Economic Group. Additional losses this week for Boeing suppliers and non-Boeing workers in Seattle impacted by the strike was estimated at $144 million and $25 million, respectively.
After union members overwhelmingly voted to reject an initial contract proposal earlier this month, the IAM refused to vote this week on Boeing’s “best and final offer” that included a 30 percent pay hike and a $6,000 contract ratification bonus, double the initial offer.
The company had initially given the union until midnight on Friday to vote on the proposal, but quickly backed off that timeline after pushback from the union, which said Wednesday that the proposal “didn’t meet the needs of our members.”
While the union called the 30 percent wage increase “progress,” it pointed out that members have only received an 8 percent wage increase over the past decade during a period of high inflation and cost of living increases.
“After a decade of hard work and sacrifice to keep Boeing flying high, the company’s leadership rewarded themselves with record bonuses, while the workers who built those planes and carried the company through its darkest times, struggled to make ends meet,” the union said in an update.
A Boeing spokesperson declined to comment on the upcoming negotiations.
The strike has garnered the attention and support of lawmakers in Washington. Sen. Maria Cantwell (D-Wash.), who chairs the Senate Committee on Commerce, Science and Transportation, posted pictures with striking workers on X with the caption, “I stand with Machinists.” Other lawmakers including Reps. Pramila Jayapal (D-Wash.), Rick Larsen (D-Wash.) and Sen. Patty Murray (D-Wash.) have also voiced their support for a fair contract.
“At a time when Boeing has a lot of work to do to set its course straight, I hope Boeing officials and machinists can come to a fair agreement as soon as possible,” Murray wrote in a post on X.
Boeing has faced intense scrutiny since the door plug of a 737 Max 9 blew out during an Alaska Airlines flight in January, prompting ramped up regulatory oversight, congressional hearings and a slate of whistleblowers to come forward.
The company agreed in July to plead guilty to conspiracy and pay $250 million in penalties as part of a proposed plea agreement with the Justice Department, concluding a yearslong investigation into the two fatal 737 Max 8 crashes in 2018 and 2019.
In short, the “business is in a difficult period,” as Boeing CFO Brian West told employees in an email last week.
“This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future,” said West, who noted the company is “working in good faith to reach a new contract agreement that reflects their feedback and enables operations to resume.”
To conserve cash, Boeing has implemented leadership pay cuts and staggered furloughs — one week off, three weeks on, with no disruption in benefits.
Other cost-cutting measures include hiring and pay increase freezes, eliminating first- and business-class air travel, pausing charitable contributions and marketing expenditures, stopping catered meals and food services at Boeing facilities and reducing the company’s participation in airshows and trade shows, according to West’s email last week.
With outside consulting and nonessential contractor work temporarily suspended, Boeing has also paused contracts with many of the federal lobbyists on the company’s payroll. The pause was first reported by Politico.
A Boeing spokesperson declined to comment on questions about potential additional cost-cutting measures in the future, referring The Hill back to West’s email.
Fitch Ratings warned at the start of the strike that an extended work stoppage, more than a week or two, “could have a meaningful operational and financial impact” and puts the company at risk of a credit downgrade.
“The duration of the strike can have an impact on the timeline to regain pre-strike production momentum,” said Dino Kritikos, managing director at Fitch Ratings. “The strike timeline also impacts liquidity, since the company continues to bear certain costs without associated production and revenues.”
Kritikos noted that it took four to six weeks for Boeing to return to pre-strike production levels after the company’s last strike in 2008, which lasted 57 days and included a 52-day production stoppage.
“Ultimately, the rating implications of a prolonged strike will balance de-risking operational execution with preserving and generating sufficient liquidity to bridge to more meaningful cash flows to repay debt,” Kritikos said.
