Boeing had a challenging day that was expected to improve on Wednesday night. However, it did not as more than 32,000 striking factory workers rejected Boeing’s latest contract offer after the company reported a $6 billion loss for the quarter. With production at Boeing’s facilities in the Pacific Northwest halted, the company’s bargaining power seems limited.
The strike is having a significant impact on the aerospace industry and the broader economy. Estimates from the Anderson Economic Group indicate that the total economic losses from the strike have reached $7.6 billion, with projections suggesting this number will exceed $8 billion this week. As of last week, Boeing workers and shareholders have incurred at least $5 billion in losses, with Boeing’s suppliers also facing a hit of around $1.8 billion.
Patrick L. Anderson, the CEO of the firm, mentioned in an email to Fortune that the cost of the strike in the fifth week was much higher than in the first week and had affected not only striking workers but also managers, engineers, suppliers, and other businesses in the Seattle area.
Boeing’s stock declined by just over 1.5% on Thursday morning and has fallen by 38% this year, starting with an incident in January where a panel of one of its 737 Max planes blew off during an Alaska Airlines flight. Shares have plummeted by approximately 65% from their all-time high of $440.62 in March 2019.
Boeing’s new CEO, Kelly Ortberg, acknowledged the erosion of trust in the company from various stakeholders due to over two decades of leadership missteps. Ortberg stated during the company’s earnings call on Wednesday that they are burdened with excessive debt and have faced significant performance issues across the organization, disappointing many customers.
Despite the strike, the company is set to continue burning cash until at least 2025, highlighting the urgency for Boeing to resume plane production. The strike has completely halted the production of several aircraft, including its 737 jets, leading to a quarterly operating loss of $4 billion in Boeing’s commercial business.
Although the strike is a major factor, the company’s space and defense business, which is not affected by the work stoppage, also suffered a $2.4 billion loss.
Ortberg cautioned investors on Wednesday that the turnaround process will take time, even once the striking machinists return to work.
Returning to the negotiating table is the next step for Boeing workers. Despite initial optimism after union representatives and Boeing collaborated with the assistance of acting U.S. labor secretary Julie Su, the contract that included a 35% wage increase was rejected by 64% of union members. The workers are demanding a 40% wage hike, emphasizing that their pay raises have not kept pace with the rising costs of living in the Pacific Northwest.
Furthermore, union members are pushing for the restoration of a defined benefit pension plan, which was revoked a decade ago after Boeing threatened to move production of its 777X jet to a nonunion plant. However, Boeing has not yet agreed to this demand.