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October 9, 2024 – 7:39 AM PDT
(Reuters) – Talks between Boeing (BA.N) and its key manufacturing union broke down, and no negotiations are currently planned as the financially damaging strike heads into a fourth week.
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The company withdrew its pay offer to around 33,000 U.S. factory workers on Tuesday, saying the union had not considered its proposals seriously after two days of talks.
The breakdown compounds financial and production problems at Boeing, one of the two primary global commercial planemakers.
The strike would cost Boeing over $1 billion a month, S&P Global Ratings estimated, while warning of a downgrade of its debt to junk territory. It had a debt of about $60 billion.
The stalemate shows no signs of resolution, a person briefed on the talks said.
“Unfortunately, the union did not seriously consider our proposals,” Boeing Commercial Airplanes head Stephanie Pope said in a note to the employees, calling the union’s demands “non-negotiable”.
“Further negotiations do not make sense at this point,” she said.
Boeing has been burning cash in 2024 as it struggles to recover from a January mid-air panel blowout on a new plane that exposed weak safety protocols and spurred U.S. regulators to curb its production.
Earlier this year, Boeing replaced its CEO Dave Calhoun with Kelly Ortberg, who started in August with the hope to pull together a labor deal and shore up the company’s reputation with customers and regulators. So far, none of that has happened.
Boeing is now examining options to raise billions of dollars to shore up its balance sheet. Reuters reported that it was looking to sell stock and equity-like securities, with its prized investment grade credit rating at risk.
The company has also introduced temporary furloughs for thousands of salaried employees, while the factories producing its best-selling 737 MAX and its 767 and 777 planes are shut. The company’s goal to boost output of its 737 MAX planes to 38 a month will likely not come to fruition until mid-2025, S&P said.
Shares of the U.S. planemaker were down 3.5% in early trading on Wednesday. The stock has lost more than 40% of its value in 2024, with a 5% fall since the strike began on Sept. 13.
Referring to the two days of negotiations, Pope said, “Our team bargained in good faith and made new and improved proposals to try to reach a compromise, including increases in take-home pay and retirement.”
The International Association of Machinists and Aerospace Workers union pushed back on those assertions, saying that Boeing was “hell-bent on standing on the non-negotiated offer” proposed last month.
“They refused to propose any wage increases, vacation/sick leave accrual, progression, ratification bonus, or the 401k Match/SCRC Contribution. They also would not reinstate the defined benefit pension,” it said.
The union, which represents factory workers on the west coast, wants a 40% pay rise over four years and the restoration of a defined-benefit pension that was taken away in the contract a decade ago. More than 90% of workers voted down an offer of a 25% pay rise over four years before going on strike.
Boeing made an improved offer last month that it described as its “best and final”, which would give workers a 30% raise and restore a performance bonus, but the union said a survey of its members found that was not enough.
Reporting by David Shephardson in Washington, Joe Brock in Los Angeles and Shivani Tanna in Bengaluru; Additional reporting by Abhijith Ganapavaram; Editing by Christian Schmollinger, Jamie Freed and Arun Koyyur
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