SEATTLE—Boeing IAM 751 & W24 union members overwhelmingly voted, 64 percent, on Wednesday, October 23, to reject the latest October 19 contract offer from the aerospace company. The strike continues.
“This wasn’t enough for our members,” Jon Holden, IAM 751 President told reporters at Wednesday’s presser following the vote. “There is a big gap we could reach especially since it has been 16 years since we had a chance to bargain every area of our contract. Trying to make all that up in one is very hard to do but our members deserve more, they have spoken loudly, and we are going to go back to the table to try and achieve those things.”
The latest offer is a much better deal from the original union leadership endorsed on September 8 that was rejected on September 12 with a vote of 94.6% by IAM members who also agreed to strike beginning the following day with a vote of 96%. The latest October 19 offer proposes the following:
- Wages: A 35% general wage increase spread over 4 years (12% in Year 1, 8% in Year 2, 8% in Year 3, and 7% in Year 4). This equated to a 39.78% effective wage increase.
- Incentive Pay: The AMPP incentive plan is reinstated, with a guaranteed minimum annual payout of 4%. Including 2024 payout in February, 2025.
- Retirement: Company 401(k) match increased to 100% of the first 8% contributed, alongside a 4% automatic company contribution. Additionally, there is a one-time $5,000 contribution to each unit member’s Boeing 401(k).
- Pension (only for those with existing plans): The BCERP multiplier benefit increases to $105 for vested employees.
- Ratification Bonus: A one-time bonus of $7,000.
- Sick Time Call-Out: Reverts to the existing contract language’ call in before shift language removed from contract
Boeing withdrew on October 8 its “best and final” offer proposed to IAM 751 & W24 union members on September 23, which left striking workers and an industry anxiously awaiting next steps.
As of the publication of this article, the Boeing Company has yet to provide any statement on the results of Wednesday’s vote.
In a statement posed to X Wednesday evening, Holden shared some insight behind the vote: “This contract struggle began over ten years ago when the company overreached and created a wound that may never heal for many members. I don’t have to tell you all how challenging it has been for our membership through the pandemic, the crashes, massive inflation, and the need to address the losses stemming from the 2014 contract.”
In January of 2014, union members approved ending its pension plan by September 2016 in favor of a new defined-contribution 401(k) plan. Just three months later, Boeing announced that it will be cancelling its pension for a new defined-contribution 401(k) plan for all nonunion employees starting January 2016 in an effort to improve cashflows and its long-term financial health, a strategy, which in hindsight, no doubt contributed to Boeing weathering its recent financial ills.
“Our objective in making this transition is twofold: continue providing an attractive, market-leading retirement benefit contributing to employees’ retirement security, while also assuring our competitiveness by curbing the unsustainable growth of our long-term pension liability,” said Tony Parasida, senior vice president of Human Resources and Administration in Boeing’s 2014 announcement.
Since 1975 the percentage of US workers with access to a retirement benefit plan with traditional pension has waned from 29% to 12% (or 12 million employees) by 2020; whereas defined-benefit plans increased to 88% (or 85.3 million employees) according to a CNN study. The primary reason for employers transitioning to defined-benefit plans is cost—”Committing to pay employees for the rest of their lives can be expensive and unpredictable,” the article states.
“Cost certainty was also important,” Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute told CNN. “Under the DB plans, the costs necessary to fund the plan could change every year depending on rates of return in the markets and growing expected longevity. Some years, no contributions would be necessary, whereas the next year they could be substantial.”
“By contrast, defined-benefit plans costs are more predictable,” Copeland added.
“They have contributions and plan administration fees paid each year, but market changes [don’t] change what the company [is] required to pay,” said Copeland.
When Boeing transitioned to its newly defined-benefit 401(k) plan in 2016 it was able to reinvest hundreds of millions of dollars per year back into the company for long term financial stability and growth.
Economic Impact of the strike
Aerospace is a multi-billion-dollar industry in Washington state. According to the Seattle Metropolitan Chamber of Commerce’s report, in 2023, Boeing supported 82% of industrywide business revenues, 80% of total jobs, and 77% of total labor income generated by Washington’s $71 billion aerospace industry.
Jefferies analyst Sheila Kahyaoglu estimated that Boeing is taking a $1.3 billion hit to free cash flow for each month of the strike, according to Barrons.
Earlier this year, the S&P Global and Moody’s lowered the aircraft manufacturer’s creditworthiness in April to BBB- (the firm’s lowest grade), the FAA capped 737 Max production to 38 planes per month following the Alaska air incident in January, plagued by delays of its 777X production, and setbacks meeting mandated international “greener” emission standards for its 767 aircrafts, resulted in the company burning through billions of dollars well before September’s strike.
Boeing hasn’t reported a full-year profit since 2018, a year before two crashes of the 737 MAX jet that led to the grounding of the plane worldwide. Its stock has taken a 12.3% hit since September 3 (Fri, Aug 30: 173.74, Oct 15: 152.35), after Wells Fargo analyst Matthew Akers downgraded the company’s stock valuation stating a problem with free cash flow.
At its third-quarter 2024 earnings briefing on October 23, Boeing President and CEO Kelly Ortberg shared the grim reality of the company’s financial challenges ahead. Third quarter results reflect impacts of the International Association of Machinists and Aerospace Workers (IAM) work stoppage and previously announced pre-tax charges on commercial and defense programs due to delays.
Revenues for the quarter were $17.8 billion, down $300 million from the previous year. So far for the year, Boeing has reported a total of $51.3 billion in revenues, down from $55.8 billion in third quarter 2023. For the year, the company is reporting a Net Loss of $8 billion with $6.174 billion in the third quarter alone.
In addition, its Free Cash Flow is reported at negative $2 billion this quarter conveying a risk to investors for Boeing to repay creditors and/or pay dividends. Boeing is reporting total Consolidated Debt at $57.7 billion, relatively unchanged from the previous quarter. Its credit rating is near junk with S&P reporting BBB-, Moody’s at Baa3 and Fitch at BBB-.
Prior to the October 22 vote, three of the highest-ranking congressional leaders—U.S. Senator Maria Cantwell (D-WA), chair of the Senate Committee on Commerce, Science, and Transportation, Representatives Adam Smith (D, WA-09), ranking member of the House Armed Services Committee, and Rick Larsen (D, WA-02), ranking member of the House Transportation & Infrastructure Committee—along with president pro tempore of the United States Senate and chair of the Senate Appropriations Committee, Senator Patty Murray (D), in a letter sent on Tuesday, October 15, to Boeing and the IAM machinists union leadership, called for a mutually beneficial resolution to the month long strike.
Thirty members of the Congressional Progressive Caucus, led by Jayapal, called on Boeing and union negotiating teams to “return to the bargaining table” a day before Boeing announced it will reduce its workforce by 10 percent—17,000 employees—due to the ongoing strike. The aerospace company, also on October 11, announced it will delay delivery of its 777X program by a year to 2026 and decommission the commercial program of its 767 freighter.
With IAM members overwhelmingly rejecting Boeing’s latest offer, some took to social media criticizing union members as “greedy.”
“Thanks you screwed up the rest of us Boeing families,” Susan Kienle wrote on X to IAM.
Beavis Brandon wrote on X, “Good luck finding another job when Boeing decides to start over and fires all of you. Greed eventually breaks even the strongest unions. BTW I am a union guy – IBEW.”
However, others are considering quality of life in retirement as a motivator for “holding the line.”
Lynnwood Hale on Facebook wrote, “Our Future” means getting a pension so you and the spouse when you retire don’t have to rely on SS or your kids for financial hardship support plus a pension is also a reward you earn for your loyalty to your company.. HOLD THE LINE”
One reddit user shared that the fight is now about respect to machinists by Boeing.
Kairukun90 on Reddit wrote, “Bro literally if they gave us this contract at 40% out of gate. I don’t think we would have been on strike. Now people are just pissed and we want more vacation and sick leave along with a few other things because Boeing is dumb.”
One thing is certain, in a strike there are no winners. The strike has cost Boeing billions, the union millions of dollars in strike pay, and union members are losing an estimated $206 million per month in wages.
Article updated: 10:45 a.m., Thursday, October 24, 2024.
