Boeing HQ
Today’s news focuses on the IAM strike at Boeing, with a lot of speculation as to what the deal could mean if ratified, and whether the sentiment among the rank and file will be to continue the strike or settle for less than their initial 40% wage increase demands. After Boeing’s initial hardball “best and final” and discontinuing of health insurance payments from the old Boeing culture playbook, with the help of federal mediators, a better offer is now on the table.
The implications of the contract, if agreed upon, are significant. Boeing’s current proposal would add $1 billion to labor expense over a four year period, a significant increase. However, the revenue losses and cash flow issues from the strike could cost Boeing its investment grade rating should the strike continue for another month. The longer the work stoppage, the greater the problems for airline customers who need lift, as well as the supply chain, who may need to begin layoffs with no short-term deliveries. Boeing needs to settle the contract sooner rather than later, and the union has a stronger position today than it has had in several decades. Ratification is not a slam-dunk, and at this point more akin to a coin flip.
Unlike before the last vote, which leadership recommended but the rank and file voted against, union leadership is not taking a position on this vote. Speculation on the vote remains premature, but several interesting analyses, including one by Scott Hamilton at Leeham, indicate that this is likely not a done deal yet. Wednesday may be a cliffhanger for Kelly Ortberg, who will not know the outcome during Boeing’s morning earnings call, and need to prepare for both potential results.
Finally, a story about Embraer and how its CEO rewrote the playbook after the Boeing deal fell apart provides an interesting read as well as a contrast between how one company grew while the other stagnated after the failed transaction.
Links to today’s news follow:
- The Boeing strike could end this week. The stakes are huge – Quartz
- Boeing’s new pay proposal may add over $1bn to wage bills over four years – Irish Times
- Boeing shares rise 3% after labor offer but analysts wary of worker pushback – Economic Times
- Voting by the numbers: How demographics weigh in Boeing contract vote Wednesday – Leeham
- Why Boeing’s 35% wage hike is a game-changer for US labor markets – WhoWhatWhy
- How the CEO of a major aerospace company totally rewrote his playbook after a $4.2 billion deal with Boeing fell through. ‘It was a baptism by fire’ – Fortune
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