Boeing Faces $50M Daily Loss as Union Strike Stalls $10B Deal and Production
Boeing is currently facing one of its biggest labor disputes in years, and it’s having a huge impact on both the company and the wider economy. Over 33,000 machinists have been on strike since September 13, 2024, and the situation doesn’t seem to be improving any time soon.
The workers, represented by the International Association of Machinists and Aerospace Workers (IAM), are demanding higher pay, better working conditions, and more involvement in safety-related decisions for Boeing’s airplanes.
Boeing offered a 30% pay raise over four years, but the union rejected it, insisting on a 40% increase and additional benefits.
The machinists are not just asking for more money, though that is a big part of it. They argue that the rising cost of living has made it difficult for them to get by, and a 30% raise isn’t enough to cover inflation and other expenses they face.
The union says that many of the workers were already struggling financially before inflation started to rise rapidly over the last couple of years. Additionally, they want Boeing to bring back the pension system that was discontinued in 2014. Right now, workers rely on a 401(k) plan for retirement, which they feel is less secure.
The union is also pushing for more input into the safety of Boeing’s products, especially after the problems the company had with its 737 Max jets, which were grounded worldwide in 2019 following two fatal crashes. The workers want to ensure that production standards and safety checks are stricter to avoid such incidents in the future.
From Boeing’s perspective, they argue that the union’s demands are too high and could make the company less competitive in the long run. According to Boeing executives, meeting the 40% wage hike request, along with other benefits the union is asking for, would add too much cost to their operations. Its leadership has been clear that they believe the 30% raise over four years is fair and already a significant increase. Stephanie Pope, head of Boeing’s commercial airplanes division, said in a statement, “Further negotiations do not make sense at this point.”
Boeing also withdrew its latest offer after it was rejected, signaling that the company does not plan to continue negotiations unless the union adjusts its stance. The withdrawal of the offer and the halt in negotiations has intensified the strike and made a resolution seem more distant.
Economic Impact of the Strike
The ongoing strike is not only affecting Boeing but also having broader economic consequences. With 33,000 workers off the job, production at Boeing’s factories has come to a halt, and this is costing the company a significant amount of money every day.
Analysts estimate that Boeing is losing around $50 million per day due to the strike, which includes lost revenue from the planes they are unable to produce, as well as the costs associated with keeping their facilities operational. If the strike continues, the total cost could reach $10 billion by the end of 2024.
The strike is also affecting other companies that supply parts to Boeing. Since Boeing has paused its operations, many of these suppliers are feeling the financial strain as well. They are not receiving the usual orders from Boeing, and this could lead to layoffs or furloughs in other companies connected to Boeing’s supply chain.
Economists have warned that if the strike drags on much longer, it could start to have an effect on the overall U.S. economy.
Some are predicting that it could shave a small percentage off the country’s GDP growth for the last quarter of 2024. Oxford Economics, a research firm, noted that the strike, combined with other economic factors like the recent hurricane in Florida, could slow down economic growth in the U.S. for the rest of the year.
Boeing’s Financial Struggles
Even before the strike, Boeing had been going through a tough period. The company has been under scrutiny since the 737 Max crisis, which severely damaged its reputation and led to billions of dollars in fines, lawsuits, and lost business. Boeing had already been struggling to keep up with demand for new planes, and now the strike has brought its production to a near standstill.
Adding to the pressure, Boeing is facing increased competition from Airbus, its biggest rival in the global aviation industry.
Airbus has been ramping up its production and winning new orders, especially from airlines looking to modernize their fleets. Boeing’s inability to meet production schedules due to the strike could push more customers toward Airbus, further weakening Boeing’s position in the market.
Analysts have also pointed out that its current financial situation is precarious. The company is expected to burn through around $50 million per day while the strike continues.
On top of that, S&P Global Mobility has issued a negative outlook on Boeing’s credit rating, partly because of the financial strain caused by the strike. Boeing is also reportedly looking at options to raise billions of dollars, including selling stock or equity-like securities to cover its cash needs.
Boeing’s stock has been hit hard by the strike. On October 9, 2024, Boeing shares were down 1.3% in premarket trading, continuing a trend of decline since the strike began. The broader stock market has also been jittery, with other major companies like Alphabet and Alibaba seeing their stocks fall on the same day. Investors are growing increasingly cautious as they wait for more news on the strike and its potential resolution.
The uncertainty surrounding Boeing’s future is making it difficult for investors to stay optimistic. Boeing had already been trying to recover from the financial losses of the 737 Max crisis, and the strike is only adding to the company’s woes. Many investors are now questioning whether Boeing can remain competitive if it continues to face labor disputes and production delays.
One of the key figures in this crisis is Boeing’s new CEO, Kelly Ortberg, who took over in August 2024. Ortberg was brought in to turn the company around after years of financial losses and production issues, but he now faces an even bigger challenge with the ongoing strike.
Ortberg has been trying to rebuild trust with customers and regulators after the 737 Max debacle, but the strike is making it difficult for him to focus on improving Boeing’s operations.
Before the strike, Ortberg had been working on addressing some of Boeing’s quality control issues, particularly in its manufacturing processes. However, the labor dispute has diverted attention away from these efforts, and now the company is at risk of falling even further behind in its production schedules.
Ortberg has remained relatively quiet during the strike, leaving most of the public statements to other Boeing executives. However, it is clear that his leadership will be tested in the coming months as the company tries to find a way to resolve the strike and get back to business.
As the strike drags on, both Boeing and the union remain at an impasse. The union shows no sign of backing down from its demands, and Boeing has made it clear that it won’t meet those demands without significant changes.
The longer the strike continues, the more damage it will do to Boeing’s finances, its reputation, and its ability to compete in the global aviation market.
There is also the possibility that the strike could lead to wider labor unrest in the U.S. If Boeing’s machinists are successful in securing their demands, other unions may be encouraged to take similar action, leading to more strikes across different industries. This could put additional pressure on companies that are already struggling with inflation and rising costs.
For now, both sides seem to be digging in for a long fight, with no resolution in sight. Boeing is continuing to lose millions of dollars each day, while the machinists remain on the picket line, waiting for a better offer.
The next few weeks will be critical in determining whether Boeing can find a way to end the strike and get back to producing airplanes, or whether the company will continue to suffer from the economic fallout of the labor dispute.