Boeing Workers Prepare to Strike, Potentially Costing Billions

Boeing is facing a significant strike that marks the company’s first labor walkout since 2008. Over 30,000 factory workers initiated their strike early Friday after the International Association of Machinists and Aerospace Workers voted against a tentative labor agreement with Boeing. This decision aims to secure a more favorable contract.

The previous strike in 2008 lasted nearly two months, leading to a notable deficit in aircraft deliveries for Boeing during that period. The company reported that this strike resulted in approximately 70 fewer commercial aircraft delivered, translating into a revenue decline of about $4.3 billion.

Should the current strike extend to a similar duration, estimates suggest that Boeing could lose at least $3 billion, according to a research note from TD Cowen. Jefferies analysts detailed that a 30-day strike could result in a cash loss of $1.5 billion, which might destabilize both suppliers and supply chains.

The rejected labor agreement was projected to cost Boeing an additional $900 million annually if accepted. Historical data indicates the financial repercussions of previous strikes. A work stoppage in 1989 cost Boeing approximately $2.5 billion, while a 2005 strike incurred losses of about $1 billion, as reported by the American Action Forum.

Researchers from the American Action Forum noted that while strikes can be costly, there is no consistent pattern in how they affect Boeing’s year-to-year revenue. They noted that the company usually opts to delay orders instead of losing them outright, leading to a shift in revenue rather than an actual loss.

However, analysts warn that the timing of the current strike could exacerbate financial challenges, particularly given Boeing’s recent legal troubles linked to the crashes of two 737 Max planes. A plea deal related to these incidents could result in a $244 million fine and additional investments totaling $455 million in compliance and safety initiatives.

The implications of a strike are compounded by Boeing’s ongoing challenges following a midair incident involving a door plug blowout in January. This incident triggered investigations that uncovered widespread safety and quality concerns and led to regulatory constraints on the company’s production processes. The issues have extended to Boeing’s Starliner space program, which is also grappling with safety-related problems.

Boeing employs about 150,000 individuals across the country and is one of the largest exporters in the United States. Therefore, a halt in operations could have repercussions beyond the company’s balance sheet, impacting the broader economy.

Researchers at the American Action Forum highlighted that while past strikes by the IAM have had limited immediate effects on Boeing’s revenue, a new strike could create substantial disruptions for the local economy and ripple throughout the national supply chain.

In response to the strike, Boeing’s CEO, Kelly Ortberg, who took office in August, expressed a willingness to resume negotiations. Quick resolution of the labor dispute would be beneficial in curtailing the financial impact of the strike on the company.