Boeing shares fell 2.7% in U.S. pre-market trading on Thursday after workers voted to extend a nearly six-week strike, casting fresh uncertainty over the company’s financial recovery and operational stability.
The move comes after 64% of unionized factory workers on the U.S. West Coast rejected Boeing’s latest contract offer, which would have ended the industrial action that has largely shut down production of its commercial jets, including the 737 MAX.
The rejected contract proposal from Boeing included a 35% general wage increase over four years but did not reinstate a defined benefit pension plan, a key issue for the striking machinists.
The vote prolongs the strike, which has disrupted production lines and delayed deliveries, creating significant pressure on Boeing’s efforts to stabilize finances after a series of setbacks.
The rejection is seen as a setback for Boeing’s new CEO, Kelly Ortberg, who took charge in August with a pledge to mend relations with factory workers and improve operational efficiencies.
The extension of the strike leaves the company in a difficult position as it continues to navigate financial pressures and attempts to restore its reputation after recent crises, including safety and quality concerns and an industry-wide shortage of parts and labour.
“Boeing is going to have to settle it and just make a higher offer, because they are just not in a position to duke it out,” said Nick Cunningham, an analyst at Agency Partners, highlighting the limited options available to the company.
Boeing’s ongoing labour dispute coincides with financial challenges, as the company has been working to improve its cash flow.
Last week, Boeing filed paperwork allowing it to raise up to $25 billion to maintain its investment-grade rating, and separately secured a $10 billion credit facility.
However, the strike has increased pressure on Boeing to find solutions, potentially forcing it to consider capital raising even before the labour situation is resolved.
Brian West, chief financial officer acknowledged the company’s cash flow issues: “We’re monitoring events closely and we’ll access the markets whenever we determine it’s the right time.”
The extension of the strike has further complicated Boeing’s path to recovery, overshadowing its announcement of a $6 billion loss for the third quarter.
The company’s production lines, including those manufacturing the 737 MAX, have been idled, affecting not only Boeing but also its suppliers, many of whom are facing financial difficulties due to the prolonged strike and previous disruptions.
Newly appointed CEO Kelly Ortberg had previously laid out a plan to restore Boeing’s market share, which has been significantly affected by competition from European rival Airbus.
However, the continued labour dispute threatens to derail these recovery efforts, with Ortberg warning that turning the company’s fortunes around will be a gradual process.
The ongoing strike represents Boeing’s first major labour action in 16 years and adds another layer of complexity to the company’s recovery efforts.
With analysts suggesting that Boeing might need to offer better terms to resolve the dispute, the focus remains on how quickly a resolution can be achieved to restart production and begin delivering aircraft.
As Boeing continues to navigate these challenges, its ability to manage labour relations, secure its financial position, and deliver on its strategic goals will be crucial for regaining investor confidence and market share.
