Through it all, Boeing and machinists' union keep fighting

Posted Oct 14th 2008 12:55PM by Joseph Lazzaro
Filed under: Forecasts, Bad News, Industry, Competitive Strategy, Employees, Boeing Co (BA)

In the space of a short month, the financial universe has been reordered.

Europe and the United States have launched major interventions plans to stabilize the global financial system. China has cut interest rates and pledged to help further to normalize financial flows. The Treasury Secretary of Russia and the U.S. Treasury Secretary are negotiating with the same goal in mind.

There's even been progress on New York's Second Avenue Subway Line, second only to, perhaps, the Burma Road in the length of time needed to complete a public works project.

Meanwhile, in Seattle . . . Boeing and the union representing machinists remain at loggerheads over a new contract, with work idled since September 6.

The work stoppage is costing Boeing (NYSE: BA) about $100 million per day, Bloomberg News reported. Even worse, lack of progress toward a new contract with the International Association of Machinists and Aerospace Workers could ultimately cost both sides much more, says stock analyst C. Leonard Bauer.

"If the strike is not settled in a week it invariably will force another roll-out delay in the first 787 Dreamliners, and in other airplanes, which would be major operational setbacks for Boeing and the machinists," Bauer said. "We're talking purchase delays and order cancellations by airlines. That will both lower projected revenue and result in lost jobs." Bauer added that he does not have a rating on nor own shares in Boeing or any airplane manufacturer.

At issue: Job security

Further, Bauer said the key sticking point in the negotiations is job security: Boeing says outsourcing is needed to contain costs, while the IAM wants more work retained inside the company.

"Right now there doesn't seem to be a lot of middle ground, so I guess the best thing is a cooling-off period," Bauer said. "It's insane that the best manufacturing sector in the nation is sitting idle, but that's where we are."

Boeing's next-generation 787 Dreamliner is already at least 15 months behind schedule, and Bauer predicts that Boeing will miss another deadline and not be able to make its first flight with the plane in November. Once airlines learn that the 787's first flight has been delayed again, "the purchase delay orders may start rolling in," he said.

Economic Analysis: The slowing global economy may prompt airlines to delay airplane orders for economic reasons, not due primarily to the strike. Still, that's no excuse for Boeing or the IAM. The global commercial aviation pie remains a huge bounty, but if Boeing and the IAM aren't careful, they're going to lose a large portion of that pie.

Boeing's shares fell $1.30 to $45.78 in mid-day Tuesday trading.

Tags: 787, 787 Dreamliner, airlines, airplanes, BA, Boeing, commercial aviation, emerging markets, International Association of Machinists and Aerospace Workers, inthenews, travel

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Reader Comments (Page 1 of 1)

10-14-2008 @ 7:08PM

Phil said...

This union has it's head stuck in the sand.
The country is in a recession, unemployment will likely go over 10%, companies are fighting to survive, and the union bosses still act like this is 1968.
Wake up people