Boeing Stock Soars as Tentative Deal Reached with Union
A breakthrough in labor negotiations has given weary Boeing investors a reason to cheer. The aerospace giant and its main worker union, the International Association of Machinists (IAM), have struck a tentative deal, sending Boeing stock up nearly 4% in midday trade.
A Sweeter Offer
Under the proposed four-year contract, Boeing has increased its pay hike to 38%, up from the previous offer’s 30% raise. The company has also merged the prior $7,000 ratification bonus with a $5,000 lump sum payment, resulting in a total of $12,000 that can be invested in 401(k) plans or taken as a cash payout. Additionally, Boeing has increased its 401(k) match and lowered health care premiums.
A Victory for Union Members
The IAM has urged its 30,000 union members to “lock in these gains and confidently declare victory,” citing the significant achievements made in the negotiations. The union believes that asking members to continue the strike would not be justified, given the substantial progress made.
Boeing’s Commitment to the Region
In a significant move, Boeing has committed to building its next airplane in the Seattle/Puget Sound region, where the IAM is located. This decision suggests that union members will assemble the new aircraft. Notably, Boeing operates a non-union plant in South Carolina, where some 787 Dreamliners are built.
The Importance of Resolving the Labor Strike
For Boeing, resolving the labor strike is crucial. The company reported a staggering third-quarter net loss of $6.17 billion, bringing total losses in 2024 to nearly $8 billion. The negative operating cash flow of $1.34 billion was attributed to lower commercial plane deliveries and the impact of the work stoppage.
The Financial Impact of the Strike
The ongoing labor strike, now in its sixth week, has had a significant financial impact on Boeing, its suppliers, and union workers. According to the Anderson Economic Group, union members have lost $808.3 million in wages, while Boeing suppliers have lost over $2.3 billion. The research firm estimates that Boeing has lost nearly $5.6 billion, with overall direct losses for all parties involved and the Seattle Metro area projected at $9.66 billion.
A Critical Turning Point
The resolution of the labor strike is a critical turning point for Boeing, which has been under intense scrutiny to improve its safety culture following the Alaska Airlines door blowout in January. The company’s dwindling cash position had threatened its investment credit rating, leading to the announcement of a $19 billion share sale to boost its cash reserves.
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