Boeing counts cost of strike action
By Hal Weitzman in Chicago Financial Times - UK October 29 2008
Boeing yesterday began to count the cost of a damaging machinists' strike after agreeing a deal with union leaders on Monday night that should enable it to resume commercial aircraft production after more than seven weeks of shutdown.
The strike by about 27,000 members of the International Association of Machinists who work in Boeing's plants in Washington state, Oregon and Kansas has taken its toll on the world's second-biggest aircraft maker.
The work stoppage is estimated to have cost the company about $5bn in lost revenues. Boeing said last week its revenues in the third quarter had fallen by 7 per cent from the same period a year ago, to $15.3bn from $16.5bn, while earnings per share fell by one-third, to 96 cents from $1.44.
Boeing's suppliers have suffered too: this week GKN, the UK engineering group, said the strike would reduce its profits in the fourth quarter by £10m-£12m ($15.5m-$18.7m).
Once workers return to the production line, Boeing will have to reassess its schedule for the oft-delayed 787 Dreamliner. A further delay seems likely. Randy Tinseth, vice-president of marketing for Boeing Commercial Airplanes, warned recently that because of the strike, the first flight - originally scheduled for this year - could be pushed into next year.
The company also faces the prospect of resuming production at a time when the global aerospace industry is entering a cyclical downturn. Joseph Nadoll, an analyst at JPMorgan in New York, said that although the end of the strike was welcome, "the plethora of bad news likely to come on the cycle, the aftermarket, margins, and further 787 delays make us more cautious on the intermediate outlook".
The deal to end the strike - which will have to be ratified by union members within the next few days - entails Boeing increasing wages by 15 per cent over four years and paying bonuses of at least $8,000 per worker over the next three years.
On the central issue of Boeing's use of outsourcing for commercial aircraft production, the union agreed to allow the company to have outside vendors deliver parts to its factories. However, within the factories, only unionised machinists will be able to deliver them to the aircraft. Boeing will retain a more extensive use of outsourced labour on the 787 programme.
"The company retained the flexibility necessary to manage its business, while making changes to the contract language to address the union's issues on job security, pay and benefits," Boeing said.
However, Mr Nadoll concluded: "It appears that the union largely got what it wanted on the key issue of preserving the jobs of those union workers that deliver parts to the line on programmes other than the 787."
http://www.ft.com/cms/s/0/2e782182-a559-11dd-b4f5-000077b07658.html
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