Boeing factory workers strike for first time since 2008 after overwhelmingly rejecting contract

Boeing‘s factory workers walked off the job after midnight on Friday, halting production of the company’s bestselling airplanes after staff overwhelmingly rejected a new labor contract.

It’s a costly development for the manufacturer, which has struggled to ramp up production and restore its reputation following safety crises.

Workers in the Seattle area and in Oregon voted 94.6% against a tentative agreement that Boeing and the International Association of Machinists and Aerospace Workers unveiled Sunday. The workers voted 96% in favor of a strike, far more than the two-thirds vote required for a work stoppage.

“We strike at midnight,” said IAM District 751 President Jon Holden at a news conference where he announced the vote’s results. He characterized it as an “unfair labor practice strike,” alleging that factory workers had experienced “discriminatory conduct, coercive questioning, unlawful surveillance and we had unlawful promise of benefits.”

He said Boeing needs to bargain in good faith. Boeing didn’t comment on his claims.

“The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members,” the company said in a statement. “We remain committed to resetting our relationship with our employees and the union, and we are ready to get back to the table to reach a new agreement.”

Stephanie Pope, CEO of Boeing’s commercial airplane unit, told machinists earlier this week that the tentative deal was the “best contract we’ve ever presented.”

“In past negotiations, the thinking was we should hold something back so we can ratify the contract on a second vote,” she said Tuesday. “We talked about that strategy this time, but we deliberately chose a new path.”

The tentative proposal included 25% wage increases and other improvements to health-care and retirement benefits, though the union had sought raises of about 40%. Workers had complained about the agreement, saying it didn’t cover the increased cost of living.

The vote is a blow to CEO Kelly Ortberg, who has been in the top job for five weeks. A day before the vote, he had urged workers to accept the contract and not to strike, saying that it would jeopardize the company’s recovery.

Under the tentative agreement, Boeing had promised to build its next commercial jet in the Seattle area, a bid to win over workers after the company moved the 787 Dreamliner production to a nonunion factory in South Carolina.

The agreement, if approved, would have been the first fully negotiated contract for Boeing machinists in 16 years. Boeing workers went on strike in 2008 for nearly two months.

The ultimate financial impact of this strike will depend on how long it lasts.

Jefferies aerospace analyst Sheila Kahyaoglu estimated a 30-day cash impact from a strike could be a $1.5 billion hit for Boeing and said it “could destabilize suppliers and supply chains.” She forecast the tentative agreement would have had an annual impact of $900 million if passed.

Boeing has burned through about $8 billion so far this year and has mounting debt. Production has fallen short of expectations as the company works to stamp out manufacturing flaws and faces other industrywide problems such as supply and labor shortages.

Aircraft delivery delays from Boeing have vexed its airline customers. In response, they said they have had to redraw their hiring and growth plans. Southwest Airlines has already sharply reduced its delivery expectations from Boeing for the year.

“As a result, we currently have the fleet needed to fulfill our upcoming schedules,” a spokesman said Friday. The airline’s leaders were in touch with Boeing ahead of the vote.

A door plug blowout on a nearly new Boeing 737 Max 9 at the start of the year has brought additional federal scrutiny of Boeing’s production lines. 

“Our aggressive oversight of Boeing continues,” the Federal Aviation Administration said in a statement on Friday.