Boeing workers strike as they reject 25% pay rise

Almost 95% of union members who voted in the ballot rejected the pay deal

Boeing workers have gone on strike after they overwhelmingly rejected a tentative deal between union representatives and the plane maker that included a 25% pay rise.

More than 30,000 workers in Seattle and Portland downed their tools from midnight Pacific Time (07:00 GMT) on Friday.

The walkout is another setback for the firm, which is facing deepening financial losses.

It is also struggling to repair its reputation after a series of safety issues, including two fatal crashes.

The stand-off adds to the challenges facing Boeing's new chief executive Kelly Ortberg, who was appointed last month with a mission to turn the business around.

Almost 95% of the union members - who produce planes including the 737 Max and 777 - voted in the ballot rejected the pay deal.

Of those who voted, 96% back strike action until a new agreement is reached.

"Our members spoke loud and clear tonight," said Jon Holden, president of the International Association of Machinists and Aerospace Workers (IAM) District 751.

"We strike at midnight."

Speaking at an investor conference on Friday, Boeing chief financial officer Brian West said the impact on the firm would depend on the duration of the strike, which has shut down production of the firm's popular 737 planes.

He warned that the stoppage "will jeopardise" the firm's recovery and said the firm was focused on repairing its relationship with workers and reaching a deal.

"We want to get back to the table and we want to reach an agreement that is good for our people, their families, our community and our intent is to do just that," he said.

Breakdown in trust

The walkout is a severe blow to Boeing and an embarrassment for Mr Ortberg, who had made a last-ditch plea to workers before the vote, warning that a strike would put the company's "recovery in jeopardy".

The question now is how long it will go on for. Boeing seems ready to get back to the table.

But there is an obvious breakdown in trust between management and the workforce – and equally between the workforce and the union leadership, who had said this was the best contract it had ever negotiated and had urged members to accept the deal.

As well as a 25% pay rise over four years, the preliminary agreement that workers rejected included a commitment from Boeing to build its next commercial plane in the Seattle area if the project started during the lifetime of the contract.

The union had initially targeted a number of improvements to workers' packages, including a 40% pay rise.

Mr West said it was clear there had been a "disconnect" and that Mr Ortberg was "personally" involved with finding a compromise.

On the face of it, it is hard to see a quick solution unless Boeing capitulates.

Analysts say an extended shutdown could cost the company and its suppliers billions.

On Friday, shares in the firm fell as Moody's warned that the situation could lead to a downgrade of Boeing's credit rating, an action that would make it more expensive for the firm to borrow.

The current contract between Boeing and the unions was reached in 2008 after an eight-week strike.

That walkout cost the company about $1.5bn (£1.14bn) a month, according to credit rating agency Moody's.

In 2014, the two sides agreed to extend the deal, which expired at midnight on Thursday.

“It’s never a good time for a strike, at least from the perspective of management, the current situation makes it even more problematic," said Greg Waldron, Asia Managing Editor at aviation news website FlightGlobal.

"Still, a great deal will depend on how long the strike lasts. Airline CEOs with 737 Maxes on order will be watching this closely,” Mr Waldron added.

Legal problems

Mr Ortberg's appointment came as Boeing found itself in a deepening crisis over its safety record. His predecessor Dave Calhoun had announced in the spring that he would step down.

In July, Boeing agreed to plead guilty to a fraud charge and a criminal fine of nearly $244m in connection with the fatal crashes of two of its 737 Max planes more than five years ago.

It is also facing other lawsuits and probes after a mid-air blowout in January of a door plug on a new plane flown by Alaska Airlines.

On top of mounting financial losses, the plane maker has slowed down its assembly lines, so that it is not even meeting a 737 Max production cap imposed by the US Federal Aviation Administration.

Mr West said the firm had been ramping back up its pace of production and had expected to meet that cap by the end of the year.

"There was very good momentum. Unfortunately there's now a strike," he said.

"My expectation is we'll pick right back up where we left off," he added. "But I don't know when."