Boeing workers strike after rejecting contract offer

Thousands of Boeing workers went on strike Friday after their union rejected a deal negotiated, a potentially costly disruption for the aerospace giant as it tries to recover from a series of safety crises.

The strike, the first at Boeing in 16 years, halted aircraft production in the Seattle area, home to the majority of Boeing's commercial aircraft production. Slowdowns can also disrupt a company's supply chain.

Boeing plays an important role in the US economy. It employs about 150,000 people across the country — about half of them in Washington state — and is one of the nation's largest exporters. The company, which also builds military jets, rockets, spacecraft and Air Force One, is a global symbol of American manufacturing power.

The White House said Friday it was in contact with Boeing and the union, the Machinists and Aerospace Workers International. “We encourage them to negotiate in good faith — toward an agreement that gives workers the benefits they deserve and strengthens the company,” White House spokesman Robin Patterson said in a statement.

Boeing stock fell 3.7 percent on Friday and is down nearly 40 percent this year. The company's credit rating is also at risk.

Boeing Chief Financial Officer Brian West told a conference Friday that the strike would affect production, deliveries and operations and “threaten our recovery.“

“We want to go back to the table,” Mr West added.

Union leaders and company management reached a tentative contract agreement Sunday after months of negotiations. Union leaders said it was “the best deal we've negotiated in our history.” But with a bigger raise than the union initially wanted, and it was rejected by 95 percent of members Thursday.

District 751 machinists union, Boeing's largest, represents a vast majority of the 33,000 workers covered by the contract, and most work in commercial aircraft in the Seattle area. The dispute also involves workers in the Portland, Ore., area who are represented by the union's smaller district W24.

The union represents about a fifth of the company's more than 170,000 employees worldwide.

“It's an honor. It's about addressing the past, and it's about fighting for our future,” said John Holden, District 751 president.

Mr. Holden said in a statement several days before the strike that union leaders recommended ratifying the deal because “we cannot guarantee that we will achieve anything more on strike.” He added that the union would “protect and support” whatever decision members make.

Kelly Ortberg, the company's new chief executive, urged employees to approve the deal. “A strike would put our shared recovery at risk, further eroding trust with our customers,” he said in an email to employees on Wednesday.

Mr. Ortberg, who joined Boeing last month, has tried to reset the company's relationship with its workers and met with workers in the Seattle area this week to hear their thoughts on the deal. Other important issues include improving quality and safety, restoring the company's reputation, fixing its relationship with regulators and improving its financial condition, including reducing debt by about $60 billion.

Ratings agency Moody's said Friday it was reviewing Boeing for a downgrade in light of the potential impact of the strike. The plane maker's rating is currently just one notch above the “junk” presumptive grade.

The last Boeing strike, in 2008, lasted 50 days; The agreement that ended the dispute has been extended twice. If the current strike lasts nearly as long, it will cost Boeing at least $3 billion, according to an estimate by Kai von Rumohr, research analyst at investment bank TD Cowen.

Boeing operates two major factories in the Seattle area: one in Renton, where it builds the 737 Max, and another in Everett, where it builds the 767 and 777.

The Max, Boeing's most popular model by far, accounts for more than three-quarters of the 5,490 planes the company has ordered. But output at the Renton factory is far behind where Boeing wants it. The company was forced to slow production to improve quality after a panel used on an Alaska Airlines flight in January fell off. Finally, Boeing plans to expand MAX production in Everett.

Thursday's rejection of the proposal reflects dissatisfaction among workers over concessions made in past negotiations, including the loss of pension benefits a decade ago, which the union sought to reinstate. Workers and unions were also angered by the company's decision in 2020 to consolidate production of its 787 Dreamliner at a non-union factory in South Carolina.

But many in the union weren't there for those events: About half of District 751's members have less than six years of experience at the company. These workers typically earn less than their more experienced colleagues, which can make a strike financially difficult, even if the union offers to pay members $250 a week beginning in the third week of the strike.

The proposed contract would have raised 25 percent over the four-year contract period; Unions began negotiations by asking for a 40 percent raise. Some workers who started at lower base wages received larger raises; For about 7,500 workers, pay would have increased by 45 percent, while another 5,000 workers would have received a 53 percent increase, according to Boeing.

Boeing said the temporary contract would increase an engineer's average salary, excluding overtime, from about $76,000 to roughly $106,000 over four years.

The rejection agreement would have awarded each union member a $3,000 ratification bonus. The Boeing union agreed to increase annual payments to the 401(k) plan by up to $4,160 per worker, cover more health care costs, provide 12 weeks of paid parental leave and improve work-life balance, including reductions in mandatory overtime. The company agreed to build its next commercial aircraft in the Pacific Northwest if such efforts were undertaken during the term of the contract.

In rejecting the contract, workers may feel they have an upper hand as the Boeing panel seeks to overcome a crisis that began when the 737 MAX fell. Although no one was seriously injured in the incident, it grounded regulators worldwide for nearly two years, five years after two fatal Max crashes raised concerns about the quality and safety of Boeing's planes.

After the January episode, the Federal Aviation Administration limited production of the MAX. The company has since increased inspections, added training for new hires, simplified procedures and started performing limited tasks in sequence, a practice known as itinerant work.

Boeing employees may also be more willing to vote for a strike because they were emboldened by recent walkouts involving autoworkers, screenwriters and actors.

Peter Eavis Contribution reporting.