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A strike from yesterday by more than 30,000 of Boeing’s US West Coast factory workers will make it harder for the planemaker to meet a 737 MAX production target and stabilise its supply chain, chief financial officer Brian West said.
West also told the Morgan Stanley Laguna Conference he expects third-quarter margins from the company’s defence and space unit to be negative, similar to those in the second quarter.
Workers from Seattle and Portland, Oregon, who produce the MAX and other jets walked off the job after overwhelmingly rejecting a contract deal due to demands for higher pay. The workers’ first strike since 2008 comes as Boeing is under heavy scrutiny from US regulators and customers after a door panel blew off a 737 MAX jet mid-air in January.
West said Boeing had made progress towards ramping production of its strongest selling jet back to 38 a month by year’s end, despite earlier scepticism from rating agencies over the target.
The strike is creating more uncertainty and concern for suppliers of parts and components for programs like the 737 MAX. Many were already having difficulty planning production due to Boeing’s repeated changes to internal forecasts for suppliers.
West said a company priority was stabilising its supply chain, but that “objective just got harder.”
West suggested Boeing would stop taking parts from some suppliers on programmes impacted by the strike where the planemaker has ample inventory. The company’s 787 widebody jet is not impacted, as it is built in South Carolina by a non-unionised workforce.
Boeing is eager to get back to the bargaining table to limit damage and reach a settlement after more than 30,000 International Association of Machinists and Aerospace Workers (IAM) members who produce Boeing’s top-selling 737 MAX and other jets in the Seattle and Portland areas voted on their first full contract in 16 years, with 94.6 per cent rejecting it and 96pc favouring a strike.
Moody’s put the planemaker’s rating on review, while Fitch said a prolonged strike could have meaningful operational and financial impact, increasing risk of a downgrade.
The union also indicated it was willing to resume negotiations soon.
“This is about fighting for our future,” said Jon Holden, who headed the negotiations for Boeing’s largest union.
Boeing had said it had offered workers everything it could and needs to plan for the investments needed to replace its best-selling single-aisle models while placating striking workers.
New chief executive Kelly Ortberg was brought in just weeks ago to restore faith in the planemaker after a door panel blew off a 737 MAX jet mid-air in January. He proposed a deal including a pay rise of 25pc over four years, far lower than the 40pc workers had demanded.
A long strike could badly hit Boeing’s finances, already groaning due to a $60-billion debt pile. To cover debt maturities, Boeing needs to generate enough cash flow.
The proposed deal included a $3,000 signing bonus and a pledge to build Boeing’s next commercial jet in the Seattle area, provided the programme was launched within the contract term.
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