FRANKFURT, Sept 9, V7N – Boeing announced on Sunday that it has reached a tentative agreement with the International Association of Machinists and Aerospace Workers (IAM), representing over 32,000 workers in the U.S. Pacific Northwest. This deal, if approved, could prevent a potentially crippling strike set to begin as early as September 13.

The proposed four-year contract includes a significant general wage increase of 25% and a commitment to manufacture the next commercial airplane in the Seattle area. This agreement represents a crucial win for newly appointed CEO Kelly Ortberg, who took over last month with a clear mandate to improve quality at the company, a challenge that labor harmony could help address.

This marks the first full labor agreement in 16 years and also brings better retirement benefits while granting the union more influence over safety and quality within the production system. The IAM hailed the agreement as the best contract it has ever negotiated, emphasizing the commitment of its workers to build high-quality planes.Boeing has faced ongoing scrutiny amid a quality crisis, particularly after a door plug blew off an Alaska Airlines MAX jetliner in mid-air earlier this year.

The ratification of this deal is critical and will require approval from Boeing factory workers near Seattle and Portland, Oregon. Should the deal receive less than majority support, it could be rejected, and a two-thirds vote in favor of a work stoppage could lead to a strike.If the contract is ratified on Thursday, it will obligate Boeing to build the successor to the popular 737 model in its Pacific Northwest facilities if the project is initiated during the contract's duration. However, the timeline for announcing the next jet remains uncertain.Boeing and its competitor Airbus (AIR.PA) are currently strategizing replacements for their best-selling single-aisle models, projected to enter service in the late 2030s.

The commitment to the Northwest for new models contrasts with past efforts to diversify production locations, a move that has previously caused friction with the IAM."This commitment means job security for generations to come," stated Boeing Commercial Airplanes CEO Stephanie Pope, addressing employees in a message.Ortberg, under pressure to reshape Boeing's culture and enhance quality, recognizes the need to improve labor relations and chart a sustainable future for the company.

Aerospace analyst Richard Aboulafia noted, "Changing the culture starts with a different attitude towards labor and new product development."Financially, Boeing is facing significant challenges, posting a second-quarter net loss of $1.44 billion in July. Analysts at Wells Fargo have indicated that Boeing's target of achieving $10 billion in annual free cash flow could be delayed by up to two years, necessitating a potential $30 billion raise before launching a new aircraft.

Boeing currently carries approximately $45 billion in net debt.Should the agreement be accepted, it would provide labor stability for Boeing as it seeks to increase production of the 737 MAX to a target of 38 aircraft per month by year-end. While the union fell short of its initial goal of a 40% raise, it remains optimistic, stating, "This proposal is the best contract we've negotiated in our history."This agreement comes at a time when workers are leveraging favorable labor markets to negotiate better terms, following the United Auto Workers union's successful 25% wage hike agreement with the Detroit Three last autumn.

Discussions have drawn attention from U.S. President Joe Biden's administration, with Acting Labor Secretary Julie Su encouraging both sides to reach a "fair contract." Su has engaged with both Ortberg and IAM local head Jon Holden throughout the negotiations.As Boeing workers, who manufacture the widebody 777 and 767 in addition to the MAX, prepare for the vote, the outcome of this agreement could significantly impact the company's future direction and labor relations.

END/WD/RH