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By Karl Sinclair

Sept. 12, 2024, © Leeham News: Boeing's largest union today rejected a four-year contract and approved a walk-out beginning at midnight tonight.

The vote to reject the contract and go on strike were overwhelming: 94.6% to reject the contract, 96% for the strike.

For financially ailing Boeing, a strike is the last thing it needs. When the union, IAM 751, last struck in 2008, the walk-out lasted 57 days and set the foundation for labor wars that continued to this day. Then-CEO Jim McNerney the following year located the second 787 assembly line in South Carolina. (The first line, in Everett, was closed during the COVID pandemic.) In 2011, McNerney threatened to build the 737 MAX elsewhere if 751 members didn't approve a contract amendment with concessions. He repeated the process in 2013 and 2014 with the 777X development. The latter was the second amendment to the 2008 labor contract that governed wages and benefits for the huge union, which represents workers at Boeing’s factories in Renton and Everett, home to the 737 and 767/KC-46A and 777, respectively. The IAM 751 also represents workers at other Boeing locations.

Union leadership want to recover benefit concessions and sharply increase wages that failed to keep up with inflation. They wanted a guarantee that the next Boeing airplane will be assembled in Puget Sound (the greater Seattle area). They wanted a seat on the Board of Directors and a role in changing Boeing’s failed safety culture.

Management wanted to hold the line. The company remains in a loss-making position, led by the continuing turmoil at Boeing Commercial Airplanes. The defense unit, which is not represented by 751, also is bleeding profits. The two units caused Boeing to burn through nearly $10bn in cash in the first half of this year alone. Only the services unit is making money, but not nearly enough to offset the losses and negative cash flows at the other two units.

More losses and negative cash flow is expected for the quarter ending this month. Company CFO Brian West speaks at a Morgan Stanley investors conference tomorrow. His will be the first detailed response to the union vote, whatever the outcome.

Internally, Boeing prepared for a 2-12 week strike.

Some observers fear that a long strike could shove Boeing into bankruptcy. LNA doesn’t agree, but we’ve nevertheless analyzed the prospect.