Announcing a preliminary agreement to end the Boeing strike

New York
CNN
—

A tentative agreement has been reached to end a five-week strike at struggling planemaker Boeing, the union announced to its 33,000 striking members early Saturday.

The deal still must be ratified by a majority of the IMA’s rank-and-file members before it takes effect and workers can return to work. The union is scheduled to hold the vote on Wednesday.

The strike was a major blow to the already struggling company, which despite recent troubles remains a major component of the American economy. Boeing is the largest exporter in America and its annual contribution is estimated at about $79 billion to the economy, and supports 1.6 million jobs directly and indirectly with 10,000 suppliers spread across all 50 states. The strike occurred just one month after new CEO Kelly Ortberg took office, who said he wanted to “reset” the troubled relationship between the union and the company.

Rank-and-file employees almost unanimously rejected an earlier tentative agreement, precipitating the company’s first strike in 16 years. But the union’s statement said that the new offer deserves to be presented to members for a vote.

The union said the offer would increase wages by 35% over the four-year term of the contract. It would also increase company contributions to members’ 401(k) plans, though it would not restore the traditional retirement plan that was taken from union members 10 years ago. Many union members expressed anger over the loss of 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 an end to the International Longshoremen’s Association strike at dozens of ports on the East and Gulf coasts earlier this month after a three-day strike earlier this month.

“We look forward to our employees voting on this negotiated proposal,” Boeing said in a statement. The brief comment appeared to be an acknowledgment that endorsing the deal might spark opposition from union members, who have maintained a tense relationship with company management.

The company is losing an estimated $1 billion a month due to the strike in addition to its ongoing losses, according to a Standard & Poor’s estimate. It also 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 aircraft, and the company makes most of its money from selling its aircraft upon delivery.

But the company’s problems go far beyond the effects of the strike. It has suffered setback after setback for more than five years, since two fatal accidents involving its best-selling 737 Max plane in late 2018 and early 2019 grounded the plane for 20 months. It has reported losses of more than $33 billion since then, and has already said it will report another huge loss on Wednesday for the just-completed quarter, most of which occurred before the strike began on September 13.

The union’s statement did not go so far as to support the offer, which members will vote on. It only said that it “includes several major improvements” and that it is “worth introducing to members and worthy of your attention.” The union’s leadership had supported the previous tentative agreement, calling it the best agreement ever reached with Boeing, only to see the rules overwhelmingly rejected by 95% of members.

This rejected offer would have resulted in a 25% wage increase over the life of the deal. Smaller improvements to 401(k) contributions and a signing bonus of just $3,000 were also possible. This offer includes a signing bonus of $7,000.

A week after that deal was rejected, Boeing improved its offer to a 30% pay increase over four years, describing this offer as the best and last. She said the union’s demand for larger pay increases was “far beyond what we can accept if we want to remain competitive as a company.”

Boeing is able to pay union members more, despite its financial problems, because worker wages and benefits make up only a small portion of the cost of producing the plane, which can sell for tens of millions of dollars each or more. Most of the money goes to raw materials and suppliers, which Provide many parts already assembled, often including the fuselage. The 33,000 striking workers handle final assembly.

It is unlikely that Boeing will be forced to stop operating due to its current financial crisis. Boeing and its European competitor Airbus are the only two companies that manufacture the full-sized aircraft needed by the global aviation industry. Its status as part of the duopoly essentially ensures its survival.

Boeing has been dealing with problem after problem — ranging from embarrassing to catastrophic and all financially devastating — for more than five years. It has had two fatal accidents, a 20-month grounding of its best-selling plane, and several federal investigations into the quality and safety of its planes, sparked by a door seal that blew off on an Alaska Airlines flight in January, an accident caused by the plane leaving the Boeing factory without the bolts needed to keep it in place. She has agreed to plead guilty to deceiving the FAA during the original certification of the 737 MAX.

This story has been updated with additional context and developments.