Tentative deal announced to end Boeing strike

By Chris Isidore, CNN

New York (CNN) — A tentative deal has been reached to end the five-week-long strike at troubled aircraft maker Boeing, the union announced to its 33,000 striking members early Saturday.

The deal still needs to be ratified by a majority of the rank-and-file membership of the International Association of Machinists before it can take effect and workers can return to work. The union will hold the vote on Wednesday.

The strike has been a huge blow for an already struggling company, which despite recent issues remains a key component to the US economy. Boeing is America’s largest exporter and has an estimated annual contribution of $79 billion to the economy, supporting 1.6 million jobs directly and indirectly at 10,000 suppliers spread among all 50 states. The strike occurred only a month into the job for its new CEO, Kelly Ortberg, who has stated he wants to “reset” the troubled relationship between the union and the company.

Rank-and-file already nearly unanimously rejected a previous tentative agreement, precipitating the first strike at the company in 16 years. But the union statement said that the new offer is worthy of being put to the membership for a vote.

The union said the offer would increase wages 35% over the four-year life of the contract. It will also increase company contributions to the members’ 401(k) plans, although it will not restore the traditional pension plan that was taken away from union members 10 years ago. Many union members had expressed anger over the loss of the pensions.

The union credited Acting Labor Secretary Julie Su with brokering the deal in indirect talks between the union and management. Su had also negotiated the end of a strike by the International Longshoremen’s Association at dozens of ports on the East and Gulf Coasts earlier this month after a three-day walk-out earlier this month.

Mounting losses from strike

“We look forward to our employees voting on this negotiated proposal,” Boeing said in a statement. The brief comment seems to be a recognition that an endorsement of the deal could spark opposition from union members, who have maintained an acrimonious relationship with the company’s management.

The company has been losing an estimated $1 billion a month due to the strike on top of its ongoing losses, according to an estimate from Standard & Poor’s. It also has announced plans to cut 10% of its global staff, or about 17,000 of its 171,000 workers. The strike has halted production of nearly all of its commercial jets, and the company gets paid most of the money from the sale of its planes upon delivery.

But the company’s problems go far beyond the effects of the strike. It has been struggling with setback after setback for more than five years, ever since two fatal crashes of its best-selling 737 Max in late 2018 and early 2019 led to a 20-month grounding of the plane. It has reported losses of more than $33 billion since that time, and it has already said it will report another huge loss on Wednesday for the just-completed quarter, most of which took place before the start of the strike on September 13.

The union’s statement stopped short of endorsing the offer that members will be voting on. It said only that it “includes several key improvements” and that “it warrants presenting to the members and is worthy of your consideration.” The union leadership had endorsed the previous tentative agreement, calling it the best deal ever reached with Boeing, only to see the rank-and-file overwhelmingly reject it by 95% of the membership.

That rejected offer would have increased wages by 25% over the life of the deal. It also would have made smaller improvements to the 401(k) contributions and only a $3,000 signing bonus. This offer includes a $7,000 signing bonus.

A week after that deal was rejected, Boeing improved its offer to 30% in wage increases over the four-year deal, terming that its best and final offer. It said the union’s demand for even larger wage hikes was “far in excess of what can be accepted if we are to remain competitive as a business.”

Boeing is able to pay the union members significantly more, despite its financial problems, because the pay and benefits for the workers makes up only a small fraction of the cost of producing a plane, which can be sold for tens of millions of dollars each or more. Most of the money goes to raw materials and suppliers, which provide many of the parts already assembled, often including the plane’s fuselage. The 33,000 workers who are on strike handle the final assembly.

And it is not likely Boeing would be forced out of business by its current financial crisis. Boeing and European rival Airbus are the only companies that make the full-size jets that the global airline industry needs. Its place as part of a duopoly essentially ensures its survival.

Boeing has been dealing with one problem after another — ranging from embarrassing to tragic and all financially ruinous — for more than five years. It has had two fatal crashes, a 20-month grounding of its best-selling plane and numerous federal investigations into the quality and safety of its aircraft sparked by a door plug that blew off of an Alaska Airlines flight in January, an incident caused by the plane leaving a Boeing factory without the bolts needed to keep it in place. It has agreed to plead guilty to deceiving the Federal Aviation Administration during the original certification of the 737 Max.

This story has been updated with additional context and developments.

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