Washington: Striking workers' rejection of Boeing's latest contract offer hit shares across the US aerospace sector on Thursday, raising doubts about the company's efforts to stabilise its finances and restore its battered image. Some 64 per cent of the planemaker's US West Coast factory workers rejected the offer late on Wednesday, leaving assembly lines idle for nearly all of Boeing's commercial jets, including the 737 MAX, the backbone of its balance sheet. Boeing shares fell over 2 per cent, and the company's leading suppliers also came under pressure, led by Spirit AeroSystems, which lost almost 4 per cent after warning of layoffs and more furloughs.
"The Boeing circumstances are obviously very challenging. We all saw the results of the vote yesterday night, which is unfortunate," Honeywell CEO Vimal Kapur said on a call with analysts. The company is a major supplier of cockpit instruments and other parts. The offer included a 35 per cent general wage increase over four years but no defined benefit pension plan, which was one of the striking machinists' main demands.
Deadlock over the pension plan, which was withdrawn following a deal to keep jobs in Washington state a decade ago, raised immediate concerns over the duration of the strike as rating agencies monitor Boeing for a possible downgrade to junk status. "A longer strike delays Boeing's recovery and increases financial pressure on the company and its credit rating," said Ben Tsocanos, aerospace director at S&P Global Ratings.
"The rejection raises the risk of a protracted strike if the obstacle is reinstatement of a pension. We believe the company is not likely to agree to a pension because of the cost.” Others said the stoppage leaves the US planemaker with dwindling options as it bleeds cash. "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 Agency Partners analyst Nick Cunningham.
"This rejection adds further uncertainty, costs and recovery delays as the strike approaches day 40. We anticipate further concessions of wages will be required for a deal to pass," Bank of America analyst Ron Epstein said in a note. With the clock ticking on a potential Boeing downgrade, the company's first major strike in 16 years has sent Wall Street combing through online forums and worker demographic data to predict how the strike over pensions and pay will unfold. Wells Fargo analyst Matthew Akers said raising the wage offer to meet the union's demand of 40 per cent could end the dispute, noting that members were divided online on the pension issue. Some machinists vowed to fight on after the vote, with many still angry about the last pension deal signed a decade ago. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
