Boeing HQ
Today’s key news indicates that it’s time to hunker down for a prolonged strike by the IAM against Boeing. Boeing, in a major mistake, provided their ‘best and final’ offer to the union, only to have it quickly rejected. Apparently, rather than go through channels and allow the union negotiating team to inform workers of the office, “Boeing took it upon itself to disrespect the entire Union by sending this offer directly to all members and the media without any prior communication from your Union.”
That cost Boeing a vote on the contract, and sent Boeing a clear message that its ’best and final’ wasn’t going to be good enough to get a deal done. This was a major misread of the troubled history between the company and the IAM, who recognize that they have a leg-up in the negotiation given Boeing’s cash difficulties and fully understand the company’s need to quickly end the strike. Boeing had initially demanded a vote on the contract offer quickly, and now has come back to provide additional time to the union for a vote. They are unlikely to be successful.
The longer the union holds out, the more pressure Boeing will face. The union knows this well, and with this latest ‘disrespect’ now has an excuse to slow down the negotiation process in response to that affront. Stay tuned, but our feeling is that we will still be talking about this at Halloween, which will not be good for Boeing, or the industry supply chain.
Ryanair, always ready to talk about Boeing and complain about late deliveries, stated that Boeing expects disruptions to remain 2-3 weeks beyond the end of the strike, making it difficult for production to immediately ramp back up. Nonetheless, Ryanair should expect delivery resumptions within a month of the conclusion of the strike.
On the regulatory side, the FAA has indicated that Boeing must still make ‘significant changes’ to improve quality and safety. FAA administrator Mike Whitaker said that this will be a three to five year process, rather than a quick fix. We should probably expect a slower production ramp-up for the 737 MAX as Boeing revamps its quality and safety processes. That may result in the company not moving past the current 38 per month rate limit until late 2025, which will constrain cash generation and alter the planned customer delivery skyline. Expect more complaints from Ryanair, Southwest, and Emirates.
An observation that hasn’t been well publicized is that the new safety organization at Boeing will not be considered essential, as it’s employees are currently subject to the one week in four furlough plan at Boeing. The optics of this move indicate that it will be very difficult to change the Boeing culture with respect to quality and safety. One would think that the company should know better after 346 fatalities and a near disaster for its major cash cow program. We are pushing our production rate projections further to the right as a result, along with the corresponding negative financial impacts.
Links to today’s key stories follow:
- Boeing makes ‘best and final offer’ to striking workers – union pushes back – Forbes
- Machinists’ union rejects Boeing’s ‘final’ offer, calls it ‘huge mistake’ – Aerotime
- Boeing gives union additional time to vote on latest offer – BNN Bloomberg
- Boeing expects disruption 2-3 weeks beyond end of strike, says Ryanair – Reuters
- FAA boss: Boeing still must make ‘significant changes’ to improve quality and safety – CNN
- FAA says Boeing safety culture reforms may take years – RTE
