Boeing workers vote down latest offer as bid to end strike fails

Boeing Co. factory workers rejected a new labor contract that would have increased their wages by 35 per cent over four years, dealing a blow to the embattled aircraft manufacturer as it tries to overcome a crippling work stoppage.

Some 64 per cent of the union members who cast ballots on Wednesday voted against the tentative agreement, according to the International Association of Machinists and Aerospace Workers district representing the 33,000 striking workers.

While the opposition this time was smaller than the overwhelming 94 per cent vote to reject the company's initial offer in September, the outcome is a setback to Boeing's efforts to get operations back on track. The planemaker has been forced to suspend work on its 737 and larger 767 and 777 airliner models at its Seattle-area manufacturing hub for more than a month, weighing on its finances and putting credit-rating companies on alert for a possible downgrade to junk status.

Boeing said earlier on Wednesday that it will likely continue to burn cash next year as it grapples with the challenges of eventually ramping up production when the strike ends.

Free cash flow is set to be negative in the first half of 2025 before turning positive in the later part of the year, Chief Financial Officer Brian West told analysts on a call after the company released earnings. Boeing will also see an outflow in the final quarter of this year, he said, after draining more than $10 billion in the first three quarters.

Investors had seen the vote as a possible positive catalyst to help the planemaker turn a corner on a year of cascading crises. Boeing shares have lost about 40 per cent of their value this year, putting them on track for the worst annual return since 2008.

The labor strife is costing the company about $100 million a day in lost revenue by some estimates, and the stoppage has shut down Boeing plants in Washington, Oregon and California. The fallout is also rippling through Boeing's suppliers. Spirit AeroSystems Holdings Inc. has said that it will furlough 700 workers, and that it might need to resort to layoffs if the strike continues into next month.

Some airlines, meanwhile, have had to revise their growth targets because they're not likely to get the aircraft they had planned for next year. Boeing had previously sought to return its 737 Max model to a production rate of 38 a month by year-end, with analysts now saying that it's unlikely to reach that target until well into 2025.

The strike by IAM District 751 is the first major labor strife at Boeing in 16 years. As hourly workers are pushing for 40 per cent pay increases and better retirement benefits, they're driven by resentment over receiving paltry wage increases over the past decade while senior executives were richly rewarded.

The latest agreement sought to address many of the frustrations that workers expressed with the company's earlier proposals. But it didn't reinstate Boeing's defined-benefit pension plan, a potential sticking point for many members.

Instead, Boeing said it would raise its contributions to workers' retirement savings plans. The company promised to make a one-time contribution of $5,000 into the 401(k) plans of all eligible workers, and fully match their contributions of as much as 8 per cent of salaries.

The latest accord had been reached with support from the White House, with Acting Secretary of Labor Julie Su traveling to Seattle to support the collective bargaining process. Last week, she met multiple times with both the union and new Boeing Chief Executive Officer Kelly Ortberg to overcome the stalemate.

Ortberg has already instituted a range of cost cuts to weather the fallout from the strike, including a 10 per cent reduction in the workforce alongside other measures that include hiring freezes and travel bans. Ortberg took over in August following a shakeup of senior management in the wake of cascading crises since the start of the year at Boeing.