Boeing factory workers gather on a picket line during the first day of a strike near the entrance of a production plant in Renton, Washington, U.S., September 13, 2024.
By Matt Mills McKenight | Reuters
RENTON, Washington — Out of money Boeing The company faces mounting costs from an ongoing machinist strike as workers push for higher wages. Failure to reach an agreement could prove even more costly.
In the shadow of a factory outside Seattle where Boeing makes its best-selling planes, Boeing machinists on the picket line told CNBC they have saved up money and have taken or are considering taking side jobs in landscaping, moving furniture or working in warehouses to make ends meet if the strike continues much longer.
The strike by workers at Boeing factories in the Pacific Northwest has just entered its second week. The financial cost of the strike for Boeing depends on how long it lasts, although rating agencies have warned that the company could face a rating downgrade if it drags on too long.
That would increase borrowing costs for the company, which already has $60 billion in debt. Boeing has burned through about $8 billion so far this year in the wake of a near-catastrophic explosion of a door stopper on one of its 737 Max jets in January.
Boeing hasn't turned an annual profit since 2018, and its new CEO, Kelly Ortberg, is trying to restore the company's reputation after months of manufacturing crises that have slowed deliveries to customers, starving it of cash.
Boeing 737 Max aircraft are seen at the airport in Renton, Washington.
Leslie Josephs | CNBC
At the local union office in Renton, machinists were preparing for what could become a lengthy strike: Union members carried large pallets of bottled water, while someone prepared a giant tuna salad in the kitchen to make sandwiches for the workers. Union vans visited rally sites in Renton, offering rides to workers on duty to the bathroom. Burn barrels provided heat for cold nighttime picket lines.
Many workers spoke of their love for their jobs but worried about the high cost of living in the Seattle area, where most of Boeing's planes are made.
According to the state’s Office of Financial Management, the median home price in Washington state is set to rise 142% to $613,000 in 2023, up from $253,800 a decade earlier. That outpaces the roughly 55% increase nationwide over that period, according to data from the Federal Reserve Bank of St. Louis.
“We cannot afford to [to own] “A home,” said Jake Meyer, a Boeing mechanic who said he will start driving for a food delivery service during the strike and is considering taking odd jobs like moving furniture. Meyer said that although he is striking for better pay from Boeing, he enjoys the work of building airplanes.
“I'm proud of my work,” he said.
Another Boeing machinist said he has been saving for months, giving up things like restaurants and paying three months of mortgage payments in advance.
“I can take whatever it takes,” said the worker, who spoke on condition of anonymity.
$50 million a day
More than 30,000 Boeing machinists walked off the job at midnight on Sept. 13 after rejecting a tentative labor agreement with nearly 95 percent of the vote (96 percent voted to strike). They received their last paychecks on Thursday, and health benefits will end on Sept. 30. A union strike fund will soon provide them with $250 a week.
According to estimates by Bank of America aerospace analyst Ron Epstein, the strike is costing Boeing about $50 million a day. The strike halted production of most of Boeing’s planes, and that is rippling through the aerospace giant’s vast network of suppliers, some of which have already been asked to halt shipments. Boeing continues to build the 787 Dreamliners at its nonunion factory in South Carolina.
Boeing Machinists Union members count votes to accept or reject a proposed contract between Boeing and union leaders and decide whether to strike if the contract is rejected, at the Aerospace Machinists Union Hall in Seattle, Washington, Sept. 12, 2024.
Jason Redmond | AFP | Getty Images
The battle pits a struggling Boeing against a workforce seeking wage increases and other improvements. Boeing’s most recent offer included across-the-board pay increases of 25% over a four-year agreement and was backed by the machinists’ union, the International Association of Machinists and Aerospace Workers District 751.
The workers said they were seeking wage increases close to the 40 percent the union had proposed, as well as annual bonuses and the restoration of pensions lost more than a decade ago.
Boeing and the union were at the bargaining table this week, but both Boeing and union negotiators said they were disappointed by the lack of progress.
“We continue to prioritize the issues you outlined in the most recent survey,” union negotiators wrote to members Wednesday, “but we are deeply concerned that the company has not addressed your key concerns. No meaningful progress was made during today's talks.”
Ortberg, who has been on the job for just six weeks, announced this week furloughs for tens of thousands of Boeing employees, including managers and executives, following a hiring freeze and other cost-cutting measures announced this week.
“During mediation with the union this week, we continued our good faith efforts to engage the union bargaining committee in meaningful negotiations to address the feedback we have heard from our team,” Ortberg said in a memo to staff Friday.
“While we are disappointed that the discussions did not lead to further progress, we remain deeply committed to reaching an agreement as soon as possible that recognizes the hard work of our employees and ends the work stoppage in the Pacific Northwest,” Ortberg wrote.
The strike, which includes Boeing machinists in the Seattle, Oregon, area and a few other places, is just the latest in a series of labor battles in recent years that has included actors, autoworkers, dockworkers and airline employees, all of whom have won raises after strikes or threats of strikes.
The Biden administration has encouraged Boeing and the union to reach an agreement.
“I think both sides want to come to a solution and hope to see one that makes sense for workers and works for a company that really needs to find its way forward on so many fronts,” Transportation Secretary Pete Buttigieg told CNBC's “Squawk Box” on Thursday.
Tight labor market
Boeing is facing a tough labor market. During the last strike in 2008, which lasted less than two months, the company was in better financial shape and there was less competition in the sector.
One Boeing supplier told CNBC that furloughing or laying off workers would cause problems for months because it takes a long time to train staff on such technical and detailed work.
During the pandemic, Boeing and its suppliers laid off thousands of workers. Since then, they have struggled to hire and train workers in time for the resurgence of air travel and demand for aircraft.
“We're in an environment where it's hard to get skilled, technical labor right now, particularly in the aerospace and defense sector,” said Bank of America's Epstein. “So what do you do to not only retain them, but attract them? If they really want a pension, maybe that gives you a competitive advantage over people who are trying to attract talent.”
