This is not the way to kick off the fall production season, typically a time when companies introduce new products and plans. Boeing (NYSE: BA) could lose up to $3.5 billion per month in revenue if a threatened strike by a machinist union occurs next week, USAToday reported Friday.The potential action by the International Association of Machinists and Aerospace Workers could also delay the 787 Dreamliner program and other aircraft programs. About 27,000 machinists in Washington state, Oregon and Kansas would be affected.
Boeing's latest contract offer calls for an 11% pay increase in annual increments of 5%, 3%, and 3%, Bloomberg News reported Friday. Machinists would also get a $2,500 payment if they approve the new contract by September 3.
Stock Analyst C. Leonard Bauer told BloggingStocks Friday Boeing "will probably have to increase its offer to the IAM, given what's at stake for Boeing."
"Boeing is in a position where it can increase its labor cost base. Revenue remains strong, with large backorders," Bauer said. "Those facts, plus the fact that Boeing can not afford any more delays in the 787 program, means the IAM has the upper hand in these contract negotiations. I'm sure the machinists don't want a strike, either, so my call would be for Boeing to up its pay raise offer to 6%, 5%, and 5% for a 16% pay increase." Bauer added that he does not have a rating on nor own shares in Boeing.
Much of Boeing's revenue growth in the next decade will hinge on the company's ability to position the new 787 Dreamliner in the global aviation marketplace -- an operational stance that assumes on-time delivery and "no further delays of the new planes," Bauer said. The first 787s are expected to be delivered in Q3 2009. United States' Boeing and European Union-based Airbus are engaged in a global contest for market share and in a battle to determine which air travel model will best meet the needs of air travelers in the initial decades of the 21st century.
Boeing argues that point-to-point, fast, creature-comfort-filled air travel characterized by the next-generation 787 Dreamliner, will be the era's defining air travel flight. Conversely, Airbus argues that superjumbo A380 air travel, which features lower ticket prices, larger seating capacity and longer ranges, will be the flight most preferred by airlines and air travelers.
Stock Analysis: A strike would hit Boeing hard, and as Bauer underscored, the IAM appears to have more power in the negotiations. That said, the union would lose much in compensation if a prolonged work stoppage occurs. Given the above, the best tack for all involved would be an improved offer from Boeing, followed by an IAM approval.
Boeing's (NYSE: BA) shares Thursday closed up $1.82 to $66.34 amid a broader market rally.
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Reader Comments (Page 1 of 1)
8-29-2008 @ 10:42AM
Chris said...
I hate unions but I hate companies that make union necessary even more.