Boeing has reached a preliminary agreement with the International Association of Machinists and Aerospace Workers (IAM) to offer workers a new contract that includes a 35% salary increase over four years and an annual bonus of at least 4%. In addition, workers will receive a one-time bonus of $7000.
If this contract is approved, it will end Boeing's current production paralysis and greatly alleviate the White House's concerns about labor market chaos. Last week, Julie Su, the acting US Secretary of Labor, personally went to Seattle, where Boeing headquarters is located, to intervene in negotiations, fully demonstrating the importance of quelling the Boeing strike for the US government.
But this preliminary agreement is not guaranteed. Although the latest agreement addresses many of the employees' dissatisfaction with the company's earlier proposal, it does not restore Boeing's fixed income pension plan, which may be a sticking point for some employees.
The new agreement will be officially voted on by the IAM union next Wednesday (October 23rd).
One difficulty followed by another
Since the strike on September 13th, Boeing and companies in the global aerospace supply chain have been facing increasing pressure. Shortly after the strike, Boeing was forced to shut down its assembly lines for its most profitable 737 Max, 767, and 777 aircraft.
Subsequently, component supplier Spirit AeroSystems warned that the company would have to lay off 700 workers responsible for manufacturing parts for the 767 and 777 projects. There are also reports that Spirit's issues have affected the production plans of another customer, Airbus, which has acknowledged on multiple occasions that it is facing supply chain troubles.
In addition, Boeing announced this month that it will lay off 10% of its workforce, sparking widespread concerns in the labor market that it will cause ripple effects across the entire industry and have a significant impact on the US economy. This also forced the US authorities to urgently intervene and mediate.
But the emergence of the preliminary agreement does not mean that Boeing's difficulties have been alleviated. In fact, further rising labor costs could potentially lay a landmine for Boeing's future.
The issue that investors are currently very concerned about is that the continuously increasing manufacturing costs and declining profit margins are gradually hitting Boeing's market share. The market wants to know if Boeing's new CEO Kelly Ortberg has a clear blueprint to reverse Boeing's current decline. Otherwise, the strike is just a chapter in Boeing's survival crisis.
On Saturday local time, a Delta Air Lines Boeing 767 aircraft came to an emergency stop in the Senegalese capital Dakar due to a technical malfunction. This is the latest safety malfunction reported by Boeing's commercial aviation division since the Alaska Airlines plane door bolt explosion incident in January this year.
The day before, the Federal Aviation Administration of the United States had just announced a new three-month safety review of Boeing.