BA strike
September 4, 2008
I’m anxiously awaiting news of a potential labor strike at Boeing Co. (BA). Leaders of the International Machinists and Aerospace Workers have recommended that the 27,000 employees they represent reject the company’s offer of an 11% wage rise, 14% increase in monthly pensions, bonuses and more in a three-year pact. The company made its final offer Thursday to workers, who are expected to reject it in a vote Wednesday morning. The Street has a good writeup on the potential strike.
- “I think Boeing is calculating that a strike is not necessarily the worst scenario,” says Bill Swelbar, a research engineer in MIT’s International Center for Air Transportation, and a labor consultant. “They have said ‘Here’s my final offer, this is what I can live with, figure out if you can live with it.” The tactic may reflect a new approach to collective bargaining, one that follows on the bankruptcy strategy — utilized in recent years by airlines — that left little room for negotiating, Swelbar says.
- Boeing’s defense side would be unaffected by a strike. Boeing Integrated Defense Systems is expected to produce 2008 revenues of $32 billion to $33 billion, slightly less than half of the company’s total. “From an [airline] customer relations standpoint, you wouldn’t want to strike, but financially, Boeing can take a strike,” Hamilton says. As for Wall Street, he says, “small investors will see their shares fall and might be unhappy, but analysts might rally behind management.”
- As a company that has recorded $13 billion in after-tax profits over the past five years, Boeing recognizes it cannot stand pat on salary. It has offered 11% over three years, plus a series of sweeteners, and says the average worker would gain $34,000 over three years. The union is seeking a 13% increase. Health care, pensions and other items also separate the two sides.
I considered selling today to avoid the risk, but decided the risk-reward favors staying in at $64.45.
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