Boeing faces strike threat as workers vote on new contract

Boeing Workers are voting on a new labor contract on Thursday, raising the possibility of a crippling strike that the company’s CEO said would jeopardize the recovery of the struggling plane maker.

The tentative agreement presented Sunday by the International Union of Machinists and Aerospace Workers and the company included 25 percent wage increases and other improvements in health care and pension benefits. Boeing also committed to building its next plane in the Seattle area after moving production of the 787 Dreamliner to a non-union plant in South Carolina.

But some workers said they plan to reject the contract and are seeking bigger pay raises, citing the rising cost of living in the Seattle area.

The vote is the first major test for CEO Kelly Ortberg, who said in a staff memo Wednesday that she has spoken with employees about the contract in Renton, Wash., and Everett, Wash., where Boeing’s main factories are located.

Ortberg has been in his position at the manufacturer’s top job for just a month and has been tasked with steady production of aircraft and eliminating safety deficiencies and quality defects after a door panel explosion at the start of the year.

“I know the reaction to our tentative agreement with IAM has been passionate,” he wrote in his staff memo. “I understand and respect that passion, but I ask that you not sacrifice the opportunity to secure our future together because of the disappointments of the past.”

Jefferies aerospace analyst Sheila Kahyaoglu estimated in an Aug. 29 note that a 30-day cash impact from a strike could be a $1.5 billion hit to Boeing and said it “could destabilize suppliers and supply chains”. He predicted the tentative deal would have an annual impact of $900 million if approved.

The union, which represents about 33,000 workers at Boeing’s Seattle-area and Oregon plant, had asked Boeing for wage increases of about 40 percent. The 25 percent increase in the interim agreement would be in line with the United Auto Workers agreement last year that followed strikes in PassageGeneral Motors and Chrysler parent Stellantis.

If approved, the Boeing deal would follow a series of union-negotiated wage increases across industries from Hollywood to airlines.

It would be Boeing workers’ first negotiated contract with the company in 16 years.

“We have achieved all we could in negotiations, short of a strike,” IAM District 751 President Jon Holden wrote to members Monday. “We recommended acceptance because we can’t guarantee we can achieve more in a strike. But that’s your decision to make, and it’s a decision we will protect and support no matter what.”

Top pay for IAM workers at Boeing will increase to $57.43 an hour once the new contract takes effect. Including some cost-of-living adjustments, raises could rise more than 42 percent, according to the union. Boeing said the engineer’s average annual salary is currently $75,608, which will increase to $106,350 at the end of the four-year contract.

If the deal is rejected and two-thirds of workers vote in favor of a strike, the work stoppage will begin after midnight in Washington state on Friday. If fewer than two-thirds vote to strike after the contract is rejected, the contract will automatically go into effect, the union said.

“For Boeing, it’s no secret that our business is going through a difficult time, in part because of our own mistakes in the past,” Ortberg said in his note. “Working together, I know we can get back on track, but a strike would jeopardize our shared recovery, further eroding trust with our customers and damaging our ability to shape our future together.”

The polls are set to close at 6 p.m. PT.

—of CNBC Phil LeBeau contributed to this report.