Boeing: Strike-ending proposal could cost company $1 billion over 4 years

Boeing has announced a labor contract proposal to end a workers’ strike, which could cost it more than $1 billion in wage-related expenses, analysts expect.

Seth Seifman, an analyst at JP Morgan, estimated in a note that the wage increase could increase Boeing’s costs by more than $1 billion, while Sheila Kahyaoglu, an analyst at Jefferies, expects wage-related expenses to reach about $1.3 billion.

However, Ben Tsokanos, director of the aerospace sector at Standard & Poor’s Global Ratings, said in an email to Reuters, “We view the proposal as a positive step,” which supported Boeing shares rising 4 percent during early Monday trading in hopes of ending the crippling strike.

The new proposal includes a 35 percent wage increase over four years, a $7,000 ratification bonus, a redesigned incentive plan and enhanced contributions to 401(k) retirement plans, including a one-time $5,000 contribution plus up to a 12 percent employer share.

The new wage increases and ratification bonus are an improvement over the previous offer, which the striking workers rejected, but the pay increases still fall short of the 40 percent wage increase over four years demanded by the machinists’ union.

About 33,000 workers will vote on the contract proposal Wednesday after a work stoppage that has halted production of models including the best-selling narrow-body 737 Max.

But even if the new contract is accepted by members, the planemaker still faces the challenge of quickly restoring production to pre-strike levels once workers return.

In a separate labor action, about 5,000 workers are set to return to work at Textron’s business jet facility in Wichita, Kan., after voting to accept a five-year contract that includes a 31 percent pay raise. The vote also coincides with Boeing’s third-quarter earnings, which are expected to report a huge loss due to a strike that crippled production.