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A tentative deal has been reached to end a five-week strike at troubled planemaker Boeing.
The agreement still needs to be ratified by a majority of the rank-and-file members of the International Union of Machinists before it can enter into force and workers can return to work. The union vote will be held on Wednesday.
The strike is a major blow to the already struggling company, which has remained a vital part of the U.S. economy despite recent troubles. Boeing is America’s largest exporter and has an estimated annual contribution of $79 billion to the economy, providing 1.6 million jobs directly and indirectly to 10,000 suppliers spread across all 50 states. The strike comes just a month after its new CEO, Kelly Ortberg, took office, saying she wanted to “reset” the troubled relationship between the union and the company.
The rank and file had already unanimously rejected an earlier tentative contract, prompting the first strike at the company in 16 years. But a union statement says the new offer deserves a membership vote.
The union said the offer would increase wages by 35% over the four-year life of the contract. While it won’t restore the traditional pension plan that was taken away from union members 10 years ago, it will increase company contributions to members’ 401(k) plans. Many union members expressed anger at the loss of pensions.
The union credited Labor Secretary Julie Sue with brokering the deal in secret talks between the union and management. Su also negotiated an end to a strike earlier this month by the International Longshoremen’s Association at dozens of ports along the East and Gulf coasts after a three-day walkout earlier this month.
“We look forward to our employees voting on this negotiated plan,” Boeing said in a statement. This brief comment appears to be a recognition that approval of the contract could spark opposition from union members who maintain a strained relationship with company management.
According to Standard & Poor’s estimates, the company is losing $1 billion a month due to the strike on top of its ongoing losses. It also announced plans to cut 10% of its global workforce, or 17,000 of its 171,000 workers. The strike has halted production of all its commercial jets, and the company makes most of its money by selling its planes once they are delivered.
But the company’s problems go beyond the effects of the strike. It has struggled with setback after setback for more than five years, since two fatal crashes of its best-selling 737 Max in late 2018 and early 2019 led to the plane being grounded for 20 months. It has posted losses of more than $33 billion since then, and it has already said it will report another big loss Wednesday for the quarter it just ended, most of which happened before the strike began on Sept. 13.
The statement of the association does not authorize members to vote. It said only that it “includes a number of key improvements” and that “it warrants delivery to members and is worthy of your consideration.” Union leadership approved an earlier tentative agreement, saying it was the best deal ever reached with Boeing, which was rejected by 95% of rank-and-file members.
That rejected offer would have increased wages by 25% over the life of the contract. It would have made small improvements to 401(k) contributions and only a $3,000 signing bonus. This offer includes a $7,000 signing bonus.
A week after that deal was rejected, Boeing improved on a 30% pay increase in a four-year contract it said was its best and final offer. It said the union’s demand for even more pay rises was “much more than is acceptable if we are to remain competitive as a business”.
Boeing, despite its financial problems, can afford to pay union members substantially more because wages and benefits for workers make up only a small fraction of the cost of making an airplane, which can sell for millions of dollars each, or more, and most of that money goes to raw materials and suppliers. They offer many parts already assembled, including the fuselage. 33,000 striking workers hold final assembly
The current financial crisis is unlikely to put Boeing out of business. Boeing and European rival Airbus are the only manufacturers of the full range of jets needed by the global aviation industry. Its location as part of a duopoly ensures its survival.
Boeing has been dealing with one problem after another — from the embarrassing to the tragic and the financially devastating — for more than five years. It has had two fatal crashes, grounding its best-selling plane for 20 months and several federal investigations into its flight quality and safety since an Alaska Airlines flight was blown up by a door plug in January. Without the necessary bolts for the plane to leave a Boeing factory. It agreed to plead guilty to defrauding the Federal Aviation Administration during the original certification of the 737 Max.
This story has been updated with additional context and improvements.
