Posted on 09/02/2005 12:48:55 PM PDT by Righty_McRight
NEW YORK (Reuters) - Boeing Co. (NYSE:BA - news) , the largest U.S. plane maker, halted production after its machinists' union went on strike Friday, voting to reject the company's latest contract offer.
Shares of Boeing fell 2 percent on the New York Stock Exchange. The stock has risen more than 60 percent since April last year as the company has rebounded from Pentagon procurement scandals and management upheaval.
But if the strike were a long one, Boeing's improved prospects could be threatened as it competes against European plane maker Airbus, an industry analyst warned.
"We believe Boeing can easily weather a short strike by deferring deliveries of planes but are concerned that a long, drawn-out strike will have a negative impact on delivery schedules," said Jared Muroff, an analyst at Prudential Equity.
The machinists' last strike, a 10-week walkout in 1995, slowed deliveries of planes and depressed Boeing's earnings.
But Fulcrum Global Partners analyst Susan Donofrio said past strikes have not had any major impact on the company's stock price.
Shares were down $1.36, or 2.1 percent, at $64.63 in afternoon trade. The company is trading at about 22.7 times its 2005 earnings forecast.
Boeing spokesman Chaz Bickers said Boeing would not build any planes during the strike, for which 86 percent of the 18,500 union members voted, with health care and pension benefits remaining key issues.
Fitch Ratings said the vote to strike does not now affect its ratings on the debt issues of Boeing or its Boeing Capital Corp. unit, but Fitch will monitor the length of the strike and could review its ratings if the strike extended beyond two to three months.
PRODUCTION HALT
The production halt threatens Boeing parts suppliers such as Goodrich Corp. (NYSE:GR - news) and BE Aerospace Inc. (Nasdaq:BEAV - news). Bickers said Boeing is rescheduling deliveries from some suppliers but refused to disclose further details.
Boeing plans to deliver 320 planes in 2005, but with production halted and supply deliveries rescheduled, that number could change.
"Since we won't be building any more planes, we need to know how long the strike will last before we can make any assumptions on deliveries," Bickers said.
Fulcrum's Donofrio said the strike could result in a delay and deferral of planned aircraft deliveries but not an outright cancellation of orders. "Any type of earnings impact, would, therefore, simply be moving their revenues to a later time period," she said, referring to Boeing and its parts suppliers.
Both sides had been bracing for a strike as the union on Wednesday had urged members to reject the company's latest contract offer.
The strike comes as Boeing's commercial aircraft business is booming, with the production halt jeopardizing profits and giving ground to archrival European jetmaker Airbus, owned by EADS (EAD.PA) and BAE Systems Plc (BA.L).
Strong demand for Boeing jets -- such as its single-aisle 737, favored by low-cost carriers from Dallas to Delhi -- gave the union an unusually strong hand in the talks this time around.
Boeing has said it expects airlines in India to buy 490 planes over the next two decades. India's Jet Airways Ltd. (JET.BO),ordered 10 planes earlier this month, valued at nearly $680 million at list prices. Deliveries are scheduled to begin in July 2006.
Alaska Air Group Inc. (NYSE:ALK - news) in June ordered 35 airplanes worth $2.3 billion at list prices.
Chile's LAN Airlines (NYSE:LFL - news) has ordered a total of 12 Boeing planes worth about $1.73 billion at list prices.
Guggenheim Aviation Partners placed an order for six planes last month valued at $1.37 billion. Deliveries are scheduled to begin in late 2006.
United Parcel Service Inc. (NYSE:UPS - news) ordered eight freighters from Boeing earlier this month. Several other airlines were said to be in talks with Boeing to order planes.
Boeing's final offer to machinists in Seattle, Washington, and Portland, Oregon, came after almost three months of negotiations.
The offer included a 5.5 percent wage increase and pension payments of $66 per month for each year of a retired employee's service, plus as much as $15,400 in lump-sum payments and bonuses. Boeing proposed a separate package for its Wichita, Kansas, employees.
The union wants employees in Wichita, Kansas, to get the same deal as other workers and wants better job security for all. It is pushing for higher pension payments and objects to the company's new health care plan, which it says pushes costs onto workers.
Don't be surprised if more of these jobs are moved overseas, to Japan or China.
Terrific timing, guys. Good job.
BA 64.4500 -1.5400 on the day
This is the contract they rejected.
http://www.boeing.com/news/releases/2005/q3/nr_050830g.html
Company's Best and Final Offer includes:
10% pension increase to industry-leading $66 per month per year of service
$15,400 additional total wages, lump sums and incentive pay over the life of the contract for employees in Puget Sound and Portland
5.5% wage increase over the life of contract through pay raise and cost-of-living adjustment
$6,000 in lump sum payments with opportunity for added $3,000 company match
5 days extra pay annually if Boeing meets business plan; opportunity for up to 15 days pay
Choice of health care plans, two with low-cost or $0-premium options
Yes it is. Boeing is sellign more planes hten they have in years. Their customers are warning them that they have to deliver on time or they will go airbus. This is a smart move by labor. I predict that boeing and the union will come to terms soon.
No, I mean terrific timing compared to all else that's going on in the country. So while the few people left in NOLA are afraid to venture outside to find food or water for fear of being murdered by roving gangs of thugs and hundreds of thousands of others have lost everything, these people have decided that they just can't live in their terrible lives working for Boeing.
I don't think they're gonna generate much sympathy.
Next to be heard.....OUTSOURCING.
Of course you have to give labor credit, they found a good time to shoot for the moon. Perhaps Boeing will let them run the company like United Airlines, er, how is UA doing these days?
Or perhaps a better example is General Motors. The union there has a very good contract. They won the contract with hard - tough negotiations. You gotta hand it to the unions, when it comes to getting their share, they know how to fight. (I only hope they know how to find new jobs quickly, they may need this skill down the road.)
So, there are a lot on this board who would hold that business has the right to do just about anything they can to increase profits. They say let the market decide.
These workers are doing just that. They are now think they are in a position to force management to give them more. They have that right. Because when you get right down to it we all sell. They are selling their labor to boeing. they are trying to up the cost and their margins.
We all sell something. They are selling their labor to boeing. They think they can make more for it. They have that right. I assure you if boeing became the only major passenger plane builder they would up their prices.
Democrat Unions. Country in crisis, major disaster, and they go on strike, damaging another sector and causing trouble when we need it least.
Modern unions have destroyed businesses, whole industrys, and personal lives.
They are truly dispicable, anti-American organizations.
Boeing will build it's planes elsewhere where it can compete with the French and Germans who subsidize their aircraft industry.
I would love to see all of these idiots lose their jobs.....and it is going to happen.
Just like the retarded unions. Economy's startin to turn a little, got some decent orders, Let's go on strike befor the weather gets cold..........
Yeah, that would all be well and good if Boeing had the "right" to say, "oh OK, I guess we'll hire other people that want to work for these wages then".
This is all about a government mandated marxist institution bludgeoning companies to death. Unions stand there doling out sucker punches while our government holds the victim down.
They can, many of these machinist are in at will states. Beside as for those not in those states The unions did the same thing business does. They lobbies government to establish law favoring it. Boeing and other do this all the time. What is good for the goose is good for the gander. This is the free market of labor at work.
How are these workers letting the market decide when they're unionized? They can offer shoddy work at comparatively exorbitant wages all b/c they belong to a group that companies are afraid to stand up to. Doesn't sound like market forces to me.
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