A Boeing 787-10 Dreamliner taxis past the Final Assembly Building at Boeing South Carolina in North Charleston, South Carolina, United States, March 31, 2017. REUTERS
SEATTLE (Reuters) – Boeing (BA.N), shares gained 3.5% on Friday on bets that the planemaker’s U.S. West Coast factory workers will approve a new wage offer and end a seven-week strike that has halted jet production and hammered the company’s finances.
Around 33,000 machinists, who have been on strike since Sept. 13, will vote on Monday on a new contract offer raising wages by 38% over four years, up from a prior 35% offer.
The proposal added a $12,000 ratification bonus but did not meet workers’ demand for the restoration of a defined-benefit pension. Boeing workers rejected two previous proposals in votes on Sept. 12 and Oct. 23.
“It looks promising since it is approaching the union’s original target of a 40% wage increase over four years. The fact that the strike has lasted almost two months is also a factor in favor of a deal,” said Ben Tsocanos, aerospace director at S&P Global Ratings.
Boeing CEO Kelly Ortberg urged workers on Friday to accept the deal, saying in a note to staff that it was time to “focus on rebuilding the business and delivering the world’s best airplanes”.
Workers on the picket lines were divided, with some telling Reuters they were ready to end the grueling strike and others determined to hold out the full 40% wage increase.
“It’s not enough. They haven’t even reached our demand,” said Kenneth Vi, a 34-year-old quality inspector.
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Kate McKinney, a 59-year-old who works on the 737 MAX jet, said she would be voting to accept the deal.
“I want to get back to work. Bills are what they are,” McKinney told Reuters.
The strike has halted production of Boeing’s best-selling 737 MAX jets as well as its 767 and 777 widebodies, leading to a $6 billion loss in the third quarter and complicating Ortberg’s turnaround efforts.
Wall Street analysts have been scanning Reddit posts and social media reactions, which were a harbinger of worker sentiment in the previous two votes.
The machinists union has said it extracted everything it could from the company while warning that future offers could be regressive.
“The proposal’s economics are a material improvement for labor. Union leadership’s endorsement, unlike the most recent proposal, should help further bridge the vote towards ratification,” said Dino Kritikos, managing director at Fitch Ratings.
Workers have the option of putting a lump sum of $5,000 from the bonus into their 401(k) retirement account or take cash.
That option, coupled with the possibility that workers could see 20% of their salary go into retirement accounts, may sway pension hardliners, Jefferies analyst Sheila Kahyaoglu wrote in a note.
Workers have lost an average of $10,400 in wages during the strike, eclipsing the average first year pay rise under the offer, Kahyaoglu said. She said Boeing’s recent capital increase puts it in a stronger negotiating position.
Its shares have fallen 8.3% since the strike began in September.
Reporting by Utkarsh Shetti in Bengaluru, Dan Catchpole in Seattle, and Allison Lampert in Montreal; Writing by Abhijith Ganapavaram and Joe Brock; Editing by Arun Koyyur and Cynthia Osterman
