AP Photo/Manuel Valdes
The results of the union vote are in, and the rank and file have rejected Boeing’s latest offer by a 64% negative vote. This rejection means that the strike will continue and likely result in continued federal mediation between Boeing and the IAM. The importance of Boeing to the US balance of trade and economy in general makes settling the strike a priority, which now appears unlikely before November.
Our expectation earlier this week was that ratification was a 50/50 proposition and that the vote could go either way.
The contract offer of a 35% increase was close to the 40% demanded by the union, but fell short by not restoring a pension plan that the union lost 10 years ago in the previous contract. This is the most contentious element of the negotiations, as defined benefit plans have fallen out of favor as 401K and defined contribution plans have flourished. Nonetheless, the IAM is seeking an “old fashioned” pension plan.
Boeing, who announced a $6.2 billion quarterly loss earlier today, can ill afford an extended strike, which is costing the company about $1 billion per month. With the IAM in the driver’s seat in negotiations, they will likely drive a hard bargain. We also expect Boeing to sweeten its offer to get a deal done as quickly as feasible to try and restore full production by December 1st.
The Bottom Line
Boeing needs to settle the strike as quickly as possible, and the IAM knows it. As a result, the IAM rank and file believe they can get a better deal from Boeing, even though the last offer was better than the previous ‘best and final’ offer from the company. Unions have been quite successful so far this year, including the UAW and the longshoremen, who negotiated a 62% increase over the life of their contract. Boeing will likely need to reach the initial 40% demand of the union on wages to settle the strike quickly. We would expect Boeing to invite the union back to the bargaining table to iron out an improved deal sooner rather than later.
Stay tuned, as the strike is not over yet.
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