What this Boeing strike is really all about

New York (CNN) — At the heart of the Boeing strike that began Friday is a story about what happens when penny-pinching executives lose the plot and it falls to workers to get everyone back on track.

Last year, Boeing didn’t make a profit. In fact, the plane maker has lost money every year since 2018, when a series of deadly crashes and near-disasters left its reputation and finances in the gutter. If Boeing were any other business — and not a too-big-fail half of a global duopoly — it almost certainly would have declared bankruptcy.

Still, in 2023, the CEO — an accountant by training — got a 45% pay bump, to nearly $33 million.

Meanwhile, wages for Boeing’s 33,000 unionized employees have been stagnant.

They are, quite simply, furious.

Years of pent-up resentment over Boeing’s mismanagement, combined with pandemic-era inflation and a resurgent labor movement, made this strike inevitable.

Boeing has a particularly rocky history between management and unions.

Past strikes — the last one was in 2008 — “happened because one side wanted to destroy the other,” said Richard Aboulafia, managing director at AeroDynamic Advisory. But in recent years, he said, the animosity was coming more from management.

In 2014, CEO James McNerney inflamed tensions with the rank and file when, on an investor call, said he would delay his retirement because “the heart will still be beating, the employees will still be cowering.” While he later apologized for the comment, calling it a “joke gone bad,” union members have not forgotten it even now, Aboulafia said.

All of this presents an early test, and an opportunity, for Boeing’s new CEO, Kelly Ortberg, who took over just five weeks ago.

Ortberg, a mechanical engineer with nearly four decades of experience in the aerospace industry, has the unenviable job of undoing a decade’s worth of executive missteps that prioritized efficiency over quality and wrecked the company’s relationship with its unionized workforce — roughly 20% of all Boeing employees.

A strike is hardly ideal for the new boss, especially given Boeing’s concurrent crises of multiple federal investigations into January’s almost-catastrophic door-plug blowout, two of its astronauts stuck in space and awaiting rescue from Boeing’s rival, SpaceX, plus a cadre of angry customers and a stock price that’s lost 40% of its value this year.

But so far, Ortberg appears to have built up some goodwill. He spent his first day at work last month touring the factory floor in Renton, Washington, and announced he would do his job primarily from the Seattle office, close to several factories and a good 2,300 miles from the company’s corporate offices in Virginia that have come to symbolize Boeing’s departure from its roots.

Ahead of the strike, Ortberg urged workers not to strike while acknowledging their anger over nearly two decades of past contracts that downsized their retirement and health care benefits.

“I think Mr. Ortberg was in a tough position coming in,” said Jon Holden, who led negotiations for the International Association of Machinists union. “It’s hard to make up for 16 years, and I think that’s a position he was in.”

Aboulafia, a fierce critic of Boeing’s management, said he’s optimistic the strike can be wrapped up “pretty quickly.”

“You previously had an incredibly dull and unimaginative leadership team and they only understood cost,” he said. “Now you have someone who understands what’s at stake.”

To outsiders, the union’s rejection of Boeing’s offer, which included a 25% pay increase over four years, may be surprising.

Even union negotiators described the deal as the best they’d ever seen from Boeing. Still, members — who’ve asked for a 40% pay increase over the four-year contract (not quite as hefty as former CEO Dave Calhoun’s one year bump) — voted overwhelmingly to reject it.

Holden said it’s hard to pinpoint a single reason for the pushback, though he noted workers want better job security, more time off and higher wages to make up for years of inflation.

Much of the rank-and-file’s anger stems from the company building a nonunion plant in South Carolina in 2011 to handle some of production of the 787 Dreamliner. In 2020, as the pandemic cratered demand for the plane, Boeing shifted its remaining Dreamliner production from its unionized plant in Washington to South Carolina.

Resentment also built after the union accepted a series of concessions, including the end of traditional pension plans, in 2011 and 2013, in order to get Boeing to drop plans to build more nonunion plants.

The latest strike reflects a broader resurgence of power among unions in the United States. Almost exactly one year ago, the United Auto Workers union won historic guarantees from the Big Three automakers after a seven-week strike.

The UAW made sacrifices, like giving up traditional pensions, to help their companies when they were hurtling toward bankruptcy and federal bailouts. But Boeing demanded the concessions when times were good, sales were strong and revenue and profits were climbing.

“I know that many members haven’t healed from that wound,” Holden said Thursday night, referring to the loss of the pension plans.

“The Boeing workers are playing hardball not just for the sake of exercising power they have in this moment but informed by what has come before,” said Sharon Block, executive director of Harvard Law School’s Center for Labor and a Just Economy. “This is a union that agreed to concessionary contracts in the past when the company was in bad shape. And this is a union that saw the company move work out of the state in order to get away from the union.”

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