33,000 Boeing workers go on strike: Impact on operations and airlines
On Friday, around 33,000 union members at Boeing walked off the job after rejecting a proposed four-year contract. This strike, the first in 16 years at the aircraft manufacturing giant, is set to halt aeroplane production, significantly impacting the US economy.
Impact on Production and Suppliers
According to CBS News, The strike will not impact commercial flights, but it is another challenge for the aerospace company, which has already faced issues with manufacturing and several federal investigations this year. The machinists earn an average of $75,608 a year, not including overtime, and this would increase to $106,350 by the end of the four-year contract, according to Boeing.
The Boeing workers' strike will severely disrupt the production of several key aircraft, including the 737 Max, 777, and 767 models. These planes are manufactured at Boeing¡¯s Renton and Everett facilities in Washington state. However, the production of the Boeing 787 Dreamliner, made by non-union workers in South Carolina, will continue unaffected.
The strike could have a ripple effect on Boeing¡¯s extensive supplier network, which includes nearly 10,000 companies across all 50 US states. With Boeing contributing an estimated $79 billion annually to the US economy and supporting 1.6 million jobs, this disruption poses a significant threat to the broader economic landscape.
Financial Consequences for Boeing
Boeing faces substantial financial challenges due to the strike. The company generates considerable revenue from delivering new aircraft, and the strike will impede this cash flow. According report a report, in note from TD Cowen estimates that a 50-day strike could cost Boeing up to $3 billion to $3.5 billion in cash flow. This is because Boeing typically receives about 60% of the sale price upon delivering a plane.
The last Boeing workers' strike in 2008 lasted 52 days, causing a revenue loss of approximately $100 million per day. With current concerns over safety and a $60 billion debt burden, an extended strike could further strain Boeing¡¯s financial stability.
Challenges for the New CEO
New CEO Kelly Ortberg, who took the helm six weeks ago, faces the difficult task of managing the strike's fallout. Boeing has already struggled with manufacturing issues and multiple federal investigations. The strike adds another layer of complexity as Ortberg attempts to steer the company back to stability and competitiveness against European rival Airbus.
Negotiations and Union Response
Union leaders had recommended accepting the tentative contract, highlighting that they had secured significant gains, including promises for future aircraft production in the Puget Sound area. Despite this, many union members remain dissatisfied with past concessions related to pensions, healthcare, and pay.
Market Reaction and Future Prospects
Boeing's stock closed up 0.9% on Thursday before the strike vote but has dropped 36% this year due to ongoing safety and production concerns, reported in HT. An extended strike could delay Boeing's recovery and potentially affect its credit rating, with both S&P Global Ratings and Moody¡¯s rating the company just above junk status.
The strike by Boeing workers marks a critical juncture for the company, with significant repercussions for its operations and financial health. The coming weeks will be crucial in determining the extent of the impact on Boeing's production capabilities and its broader economic implications.
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