By Joe Brock
SEATTLE (Reuters) -Negotiators at Boeing (NYSE:BA) and its largest union are due to resume talks over a labor contract on Tuesday, as the planemaker seeks to bring a swift end to a strike that is costing the indebted company an estimated $100 million a day.
More than 30,000 Boeing factory workers in the Seattle area went on strike on Friday after overwhelmingly rejecting their first full contract offer in 16 years, which included a 25% pay increase spread over four years but removed an annual performance bonus.
The top negotiators at Boeing and the International Association of Machinists and Aerospace Workers (IAM) will meet with federal mediators in Seattle on Tuesday for preliminary talks, a person familiar with the process said.
Boeing and union negotiators are not expected to discuss details of a new offer at the meeting, which is more about setting out the rules of future talks, another source with knowledge of the mediation said.
The sources declined to be identified because they were not authorized to speak to media. Boeing and IAM declined to comment.
A prolonged strike could cost Boeing several billion dollars, fraying the planemaker's already strained finances and threatening a downgrade of its credit rating, analysts say.
Boeing said on Monday it was freezing hiring and weighing furloughs as it seeks to cut costs to limit the impact of the strike and rein in its debt, which stands at around $60 billion.
The strike is halting production of Boeing's strong-selling 737 MAX jets, along with its 777 and 767 widebody aircraft, delaying deliveries to airlines.
Michael O'Leary, CEO of Boeing customer Ryan Air , said on Tuesday he thinks an agreement will be reached in the next three or four weeks.
"But that means three or four weeks of delay of our aircraft deliveries," O'Leary said in an interview, adding that some planes expected during the last quarter might slip into early 2025.
WEEKS-LONG STRIKE?
Union members manning picket lines outside Boeing factories in Seattle expressed little sympathy for the company's financial plight, with many saying they were anticipating a protracted negotiating period and a weeks-long strike.
"It makes me a little happy to see that they're showing the first signs of struggling because I don't think they care about their workers at all," said Martin Klyavkov, 20, who works building wings for the 737 MAX.
"Boeing is going to get desperate one of these days and cave."
Klyavkov and several other young Boeing workers told Reuters they were getting part-time jobs as food delivery drivers to supplement the $250 a week the union will pay them during a strike, starting in the third week.
Boeing and union leaders miscalculated during their initial negotiations, announcing an agreement over a tentative contract that more than 94% of IAM workers later rejected. The union originally had asked for a 40% hike.
Analysts expect it will take time to rebuild trust and bring another deal to workers who are venting frustration built up over a decade of stagnant wages and rising living costs.
Equity research firm Melius Research found median employee compensation for the aerospace and defense firms it monitors grew 12% between 2018 and 2023, while at Boeing it fell 6%.
"I think it'll be a while before they get an agreement," said Bill George, former Medtronic (NYSE:MDT) CEO and executive fellow at Harvard Business School.
"The compensation may rise to the point where it's not competitive for Boeing but that might be the lesser of a couple of evils in terms of a long strike."