By Susanna Ray
Nov. 2 (Bloomberg) -- Boeing Co. machinists start returning to work today after accepting a contract with 15 percent raises, ending a strike that idled the planemaker's factories for eight weeks and cut profit by about $10.3 million a day.
The four-year contract was approved last night by 74 percent of the voters, the International Association of Machinists and Aerospace Workers said in Seattle, home to Chicago-based Boeing's manufacturing hub. The first workers are scheduled to return late today with the start of the third shift.
``We're looking forward to having our team back together to resume the work of building airplanes for our customers,'' said Scott Carson, Boeing's top commercial-planes executive.
The world's No. 2 commercial-jet builder may need until December to get assembly lines back up to speed, said Joseph Campbell, an analyst at Barclays Capital in New York. The strike by the union's 27,000 Boeing members in Washington state, Oregon and Kansas started Sept. 6, costing Boeing about $100 million in lost revenue each day and further delaying the 787 Dreamliner.
``Most of it eventually will be made good, though it'll take a year or more,'' said Richard Aboulafia, an analyst with aviation consulting firm Teal Group in Fairfax, Virginia. No airlines canceled their orders because of the strike, so ``those customers will get their jets and they will pay for them.''
Boeing has said it will give a new profit forecast and an update on the 787 program after workers return and it can assess the full impact of the stoppage. The company had been building about 40 planes a month to fill a record $276 billion order backlog, boosted by airlines eager to save on fuel by using newer models. That's one reason the union insisted on a bigger share of the profits for its members.
Boeing Shares
The company's shares have fallen 21 percent to $52.42 in New York Stock Exchange trading since the Sept. 3 vote to strike. During that time the global credit crisis ballooned, U.S. gross domestic product contracted and the two-decade expansion in consumer spending came to an end. The walkout was blamed in part for a September decline in U.S. industrial production that was the biggest since 1974.
``There's over seven years of airplanes to be built, and the situation with the financial market didn't change that,'' IAM District 751 President Tom Wroblewski said last night. ``In fact, while we were on strike they even sold more airplanes.''
The 57-day walkout was the third-longest of seven in the union's 73-year history. Workers who averaged $54,000 a year in salary had to get by on union strike pay of $150 a week.
57-Day Walkout
``I think the union's out of touch with reality'' and shouldn't have gone on strike, said Don Icenogle, 45, an inspector at the plane-development center in Seattle who voted ``yes'' both times. ``This isn't that different a contract from the first one, and yet 57 days later it was approved.''
The machinists won raises of 15 percent over four years, bonuses totaling at least $8,000 in the next three years and increased pension payments. In addition, they won't have to pay more for their health-care costs as Boeing had wanted. The new contract runs four years instead of the traditional three, giving Boeing an additional year of labor peace.
Boeing and the union compromised on key issues involving the use of contract workers, which the planemaker said are needed to give it flexibility as conditions change and the union said threaten its members' jobs. Machinists will take back some of the parts deliveries in factories that had been done by suppliers; maintenance workers won't be laid off if subcontractors doing similar jobs are still working; and the union can bid for work Boeing is considering moving to a different plant.
Ramping Back Up
Suppliers including Spirit AeroSystems Holdings Inc. cut hours, laid off workers or reduced earnings projections when they had to slow or halt parts shipments to Boeing. Spirit has said it will need 90 days to return to normal production.
While the machinists will eventually catch up in building models that are already in production, the 787 may be further delayed by the strike. The plane was already at least 15 months behind schedule, because of parts shortages, a redesign and problems with suppliers not doing the work expected. Boeing has said the walkout means a ``day-for-day'' delay.
Goodrich Corp., which makes brakes, engine housings and other parts for the 787, said Oct. 23 that the strike probably would push the plane's entry into service back to 2010.
The machinists' approval on the contract doesn't end Boeing's labor issues. The Society of Professional Engineering Employees in Aerospace began negotiations with Boeing this week for its 20,300 members, who have also threatened to strike once their contract ends Dec. 1.
``SPEEA's contract is coming up and Boeing just wanted us to get back to work, so they changed the language just enough to make people think things are better, but nothing's changed,'' said Dorothy Hertel, who voted against the new contract. As a quality-assurance inspector on the 787 assembly line, the 23- year Boeing worker said she hoped for more limitations on outsourcing in the new agreement.
To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net.
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