Boeing (BA) Settles With Unions: All That Wasted Time

October 28, 2008 by Douglas A. McIntyre

R218533_855025Moving into the pit of a recession, Boeing (BA) executives managed to prolong a strike with the company’s machinists for seven weeks before reaching an four-year accord. Management almost certainly knew their tipping point for settling, so what was the wait for?

In the meantime, the big aerospace firm allowed its long-delayed Dreamliner to get even later which will almost certainly cause airline customers to seek penalties. That would be another few hundred million dollars out the door. Airbus certainly took whatever advantage it could of the significant failure of the people who run Boeing.

According to The Wall Street Journal, Boeing will be able to use outside contractors to build some parts but  “once the parts enter the factories, only union workers will be allowed to handle them and see them to their final destinations.” That sounds like a huge win for the company.

While Boeing dawdled getting minor concessions from workers, it undermined its ability to fulfill a massive backlog of aircraft which pushes revenue out into the future. The company has years worth of planes to deliver, so it is a mystery why a four-year deal would do anything but put the most modest pressure on Boeing’s profit margins. As the stand-off moved from days to weeks, Boeing’s shares dropped from more than $60 to under $43. Some of the can be attributed to the stock market. The balance can be assigned to stupidity.

Anticipating the strike months ago, Boeing knew what it needed to settle.  That means getting the labor stoppage out of the way without waiting seven weeks should have been a relatively simple matter.

Douglas A. McIntyre