More than two years ago, IAM District 751 president Jon Holden started laying the groundwork. He began exhorting his members—the mechanics and inspectors and line workers that make up the bulk of Boeing's workers—to earmark part of their salaries union strike fund to tide them through an extended period sans paychecks should they need it.
Now they do. On Thursday, September 12, the membership representing 33,000 machinists in the Puget Sound region voted overwhelmingly to reject a tentative, last-minute agreement reached between Boeing and the union leadership just four days earlier. Though District 751 president Jon Holden praised the proposed pact as "the best contract we've negotiated in our history," and recommended ratification, ninety-five percent of the rank in file who voted cast their ballots to strike, far more than the two-thirds majority required. The machinists last unleashed this weapon in 2008, emptying Boeing’s Seattle-area plants for 58 days and costing the company a reported $100 million a day.
The strike couldn't come at a worse time for Boeing. Whatever the contract eventually spells out, it will cost the aerospace icon big. The looming jump in production costs, after a long period when the wage bill rose slowly courtesy of a highly favorable, ultra-long-term agreement reached 2008, will further challenge Boeing's leadership to reverse a recent string of big losses. In the first half of 2024, Boeing's bled $8.3 billion in free cash flow. News of the the "no" vote pounded its stock by almost 5.7%; on September 13, its shares closed around $158, their lowest level for 2024, and one-third below its price at the year's start.
Airline customers are already furious over quality defects and crippling delivery delays that have plagued Boeing since the 'blowout heard round the world' on January 5, where a door plug ripped from 737 Max, at 16,000 feet over Portland. The strike represents a big test for new CEO Kelly Ortberg. He clearly wants to avoid a long walkout that would further hammer Boeing's weak finances, and stop the flow of new 787 Dreamliners and 737 Maxes that the carriers have on order, and sorely need to expand their networks and replace aging planes. Boeing's tough position gives the machinists the whip hand. It appears that Boeing's en route to a deal that substantially raises its labor cost structure. So a major task for Ortberg will be finding productivity improvements that offset, or at least partially blunt, the big wage and benefit gains secured by the machinists.
But to understand how this may play out, it's vital to examine what the union is demanding, and why. (You can read the full Fortune story about the roots of the biggest labor dispute in business here .) Here are the main sticking points.
Pay and benefits
The IAM occupies a position of strength on the pay issues. “We’ve got better leverage than at any time in our history,” Holden stated at a press conference the day the talks started earlier this summer. At that event, he unveiled the union’s wish list—and top of the roster was pay. The IAM wanted wage increases totaling 40% over a three-year contract. Forget anything resembling the length of the last 10-year deal that, he said, locked in minimal raises for far too long. Right now, at six years experience, his members earn between $40 and $51.30 an hour, depending on their skill level. That’s a maximum of $107,000, excluding overtime. Even a 30% raise would bring the top number to almost $140,000.
Under the offer that the union nixed, general wages would increase a total of 25% over the four-year contract. But for the average worker, seniority step-ups for over 4000 employees would lift the average gain to 33%. Plus, Boeing agreed to lower workers' out of pocket medical costs, contribute $4,000 a year to their 401(k) plans, and provide twelve weeks of paid parental leave. The troubled colossus also promised a $3,000 one-time payment if the members approved the deal by September 12th. But the one-third average increase is well below what the machinists were demanding, and according to stories in the Seattle Times , many members believe the number's inflated, since Boeing is cancelling its bonus program that provided annual raises of around 4%.
Safety
The roots of this dispute date back to 2018, when as I wrote earlier this summer , a major breach opened between the union and management: "In November of that year, management presented the IAM a PowerPoint that outlined a sweeping revamp of the manufacturing system. The idea was to automate, simplify and streamline traditional processes in the lean manufacturing mold. The central plank: empowering the mechanics building the planes to inspect their own work as they did their riveting, shimming or fastening, For many jobs, the new regime would eliminate the longstanding checks on their finished work performed by the Quality Assurance inspectors."
Holden insists that the battle to maintain comprehensive, in-person inspections is far from over. “Boeing is still making proposals for self-inspection and random sampling, and has a big motivation to keep on doing it,” he says. “It’s only because the FAA acted on whistleblower reports that we have those inspections today.” Adds IAM official Travis Kendrick, who served on the committee that battled QT, “We’re working on the safety culture, but their attitude is a complete disappointment. They’ve tried to dismantle the quality system for five years or so. It’s still not back to where it should be.”
Given Boeing’s multiple safety failings, the PR landscape favors the IAM. “Boeing just can’t afford to lower their deliveries even more and disappoint their customers even more,” says Rob Spingarn of Melius Research. Boeing’s lack of wiggle room means that the eventual settlement will likely prove highly expensive. Spingarn believes that Boeing could have accepted a costly deal without a strike, or end up where it is now, shouldering the costs of an outage, and ending up stuck with an equally expensive contract anyway.
Planebuilding
Finally, the union made as a top priority winning two concessions that Boeing had never before granted: Pledging to build its next all-new aircraft in the Puget Sound area, and giving the union a voice in setting its quality control system. “We believe [the next clean-sheet plane] has to happen here,” Holden said at the time. “And I have to get that security piece, and it can’t be up to them at some point in the future to threaten us to move it somewhere else. This is our only opportunity, and the time is right now.”
In the spurned agreement, the IAM prevailed on both counts. Boeing agreed to manufacture its next totally-original aircraft, almost certainly a narrow body successor to the Max, in the Seattle area rich workforce experience. Its offer also included protocols that would grant the machinists new authority in establishing production standards and approving changes to inspection procedures.
Ron Epstein, an analyst for J.P. Morgan, states that the Seattle area boasts the best-trained airplane-making workforce and aerospace education the U.S. by far. Hence, in his view, Boeing made the right move in seeking to settle the this incredibly contentious issue by removing any chance of threats, and choosing the region that hatched such legends from the 747 to the Max that’s towers among the biggest hits in aircraft history. A former top aerospace executive perhaps put it best: “Threatening union jobs by outsourcing and shopping in different states for the cheapest place to build planes is part of a failed strategy.”
On September 13, Boeing CFO Brian West stated, that the company's senior leadership "wants to get back to the table and hammer out a deal."
As for Holden, as he told me this summer, his goal has always been to save Boeing—from itself. “We want Boeing to be profitable, we need a healthy Boeing,” he avows. But he’s rallied his troops to endure a long walkout if that’s what it takes to secure the bulk of their agenda.
This story was originally featured on Fortune.com
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