Boeing strike continues as union rejects contract, scuttling CEO's recovery plan

Kelly Ortberg's turnaround express heads back to the hangar

Thousands of unionized Boeing machinists will remain on strike after rejecting their employer's latest contract offer, dealing a swift blow to recovery plans CEO Kelly Ortberg outlined yesterday. 

Boeing shares plummeted in after-hours trading, erasing gains made when a possible deal was announced over the weekend. The new contract was rejected by 64 percent of union members the same day Boeing announced a dreadful quarter capped off by $6.1 billion in losses, which the company largely blamed on the International Association of Machinists and Aerospace Workers (IAM) work stoppage.

The strike, involving some 30,000 Boeing employees in the Seattle and Portland areas, began in mid September after 94.6 percent of the union's rank and file voted against the initial contract offering and 96 percent voted to walk off the job. 

"Workers across America know what it's like for a company to take and take – and Boeing workers are saying they are fully and strongly committed to balancing that out by winning back more of what was taken from them by the company for more than a decade," IAM District 751 president Jon Holden and IAM District W24 president Brandon Bryant said of the failed vote. 

The "take and take" Holden and Bryant refer to is likely to do with one of the biggest sticking points in the negotiations – workers' pensions. 

Boeing phased out fixed-benefit pensions in 2014 in favor of 401(k) portfolios for employees, and union members have made clear since negotiations began that they wanted those fixed benefits back, something the company hasn't budged on. 

"There is no scenario where the company reactivates a defined-benefit pension for this or any other population," Boeing chief negotiator Mike Fitzsimmons told The Seattle Times last month after a previous offer was rejected by the IAM. 

The latest contract, delivered to the union over the weekend after acting Labor Secretary Julie Su stepped in to help hammer out a deal, included a boost to 401(k) contributions by Boeing, along with a gradual 35 percent pay increase, as well as one-time, lump-sum signing bonuses and retirement contributions, but it wasn't enough. The union has been demanding a 40 percent pay rise, which Boeing has so far not met in negotiations.

"IAM District 751 and W24 members at Boeing … are seeking to make up ground for nearly 10 years of stagnant wages and many givebacks that were part of prior negotiations," the union said.

The union noted it would send new dates for negotiations to Boeing immediately, though it's not clear whether that has been done yet, and the IAM didn't respond to request for comment. 

Taxi those recovery plans back to the hangar, chief

While shares wiggled a bit yesterday, the pending vote kept things from plummeting too drastically after Boeing reported one of the worst quarters in its history – but the vote's over, it failed, and all bets are off now. 

Boeing satellites come apart while in service, too

To add insult to injury, a communications satellite used by service provider Intelsat, and made by Boeing, disintegrated after an "anomaly" over the weekend - not an impossible incident, but headline-making given the timing. 

It's not clear what happened, but the Boeing-made IS-33e didn't get the best start in life. When it launched in 2016 the satellite experienced propulsion problems that delayed it reaching its intended orbit, and the following year additional propulsion issues cropped up that led Intelsat to reduce the craft's expected life expectancy by three and a half years. 

Those earlier issues resulted in a sizeable insurance payout for Intelsat, meaning the breakup wasn't insured. This is the second Boeing-made high-throughput satellite Intelsat has launched. The first, IS-29e, stopped working after three years due to a fuel leak. Geostationary communications satellites like the pair are usually expected to have a 15 year lifespan. 

Boeing's new CEO, Kelly Ortberg, had a lot to say on yesterday's earnings call about his plans for whipping his enterprise back into shape, including that his top priority was ending the strike. 

"The first and foremost on everybody's mind today, is ending the IAM strike," Ortberg said. 

"We have been feverishly working to find a solution that works for the company and meets our employees' needs," the CEO added. "I met with the union leadership the first week on the job and let them know that I was committed to resetting the relationship." 

Ortberg's motivations aside, the company hasn't managed to get that recovery plan off the ground yet, and the union's rejection of the latest cabinet secretary-negotiated deal doesn't appear to have pleased investors - shares fell immediately as soon as US markets opened this morning.

Boeing has given no indication of its next move, and declined to comment on the result of the vote. The union, on the other hand, appears ready to dig in. 

"Ten years of holding workers back unfortunately cannot be undone quickly or easily, but we will continue to negotiate in good faith until we have made gains that workers feel adequately make up for what the company took from them in the past," Holden and Bryant said. ®