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By Hugh Cameron
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Boeing is grappling with a deepening crisis after its machinists' union rejected the latest contract offer, extending a costly strike that is draining the aerospace giant of an estimated $1 billion a month.
The strike, which began in mid-September, involves about 33,000 members of the International Association of Machinists and Aerospace Workers (IAM). The union, Boeing's largest, have been seeking a 40 percent salary increase over the next three to four years to amend what they say has been "ten years of stagnant wages," as well as improved employee benefits.
On Wednesday, the machinists union rejected Boeing's latest proposal, with 64 percent of its members voting to extend the industrial action. IAM District 751 President Jon Holden said that the vote signal from Boeing's workers that they are fully committed to "winning back more of what was taken from them by the company for more than a decade."
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According to financial analytics and credit rating firm S&P Global, the strike is costing the company over $1 billion per month, despite putting in place multiple cost-saving measures since mid-September.
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The proposal itself included a 35 percent pay increase, as well as improved health and retirement benefits, and is the second to have been rejected by the workers in less than two months. The latest offer, however, failed to reinstate the strikers' demands for a defined-benefit pension plan, scrapped by Boeing a decade ago.
The strike has already taken a heavy toll on the company, compounding Boeing's prior production issues and stalling the manufacturing of its key aircraft, including the 737 MAX, 767, and 777 models.
This has put the company in dire financial straits. In its latest financial report released Wednesday, Boeing revealed a quarterly net loss of $6.17 billion. In an effort to protect the business, Boeing CEO Kelly Ortberg recently announced plans to shed 17,000 workers across the company, and in mid-October, Boeing said that it was seeking to raise up to $35 billion in funds through stock offering and a credit agreement with its lenders.
S&P, along with the credit rating agencies Moody's and Fitch have put Being's at the lowest investment grade, according to MarketWatch, meaning any downgrade would see them branded with a "junk" bond rating.
Prior to the release of its quarterly results, Boeing's CEO said that the company was "feverishly working to find a solution that works for the company and meets our employees' needs."
However, Ortberg admitted that the company was at a "crossroads," saying that trust in the aerospace giant has "eroded," the firm is "saddled with too much debt," and that Boeing has "had serious lapses in our performance across the company which have disappointed many of our customers.
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According to Jonathan Root, senior vice president and lead Boeing analyst at Moody's Ratings, "an agreement will be reached with financial terms that Boeing can bear."
He told Newsweek that while Moody's has long believed the company could tolerate the 40 percent pay increase the striking workers seek, the IAM's pension demand "is and will remain a non-starter."
While he could not estimate how long the strike could last, he said that the Wednesday vote, in which a sizeable 35 percent voted in favor of Boeing's proposal, "indicates that the gap is narrowing and prospects for a more timely resolution measured in days or weeks seems plausible."
Moody's is currently reviewing Boeing's Baa3 rating, the firm's lowest "investment-grade" rating for bonds, in light of the company's ongoing struggles.
However, Root said that this was not "a referendum on [Boeing's] viability," and its "operations and business fundamentals," including demand for both its commercial and defense portfolio, will remain stable.
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Update 10/25/24, 12:21 p.m. ET: This article was updated with comment from Jonathan Root.
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