By now, you've probably heard the news: Boeing (NYSE: BA ) and the International Association of Machinists (IAM) leaders have called a truce.
Fifty-two days have elapsed since IAM members voted to reject Boeing's "best and final" contract offer back in September. That's $5.2 billion in revenue "lost" to the aerospace behemoth, and perhaps $535 million in lost profit -- at least according to some sources. I think the damage was significantly less. But whoever's right on the precise numbers, it seems seeing Boeing's earnings news last week made somebody blink.
News at 11. Tomorrow. Or maybe Thursday.
According to reports that began filtering out last night, the latest round of intra-strike negotiations between the parties finally bore fruit yesterday. Full details are being withheld pending notification of the IAM family, but what we do know is this:
- The new contract will run for four years, instead of the expected three.
- Everything from wages to pension and health benefits to corporate outsourcing policy, was on the table -- and will now be set in stone for the next four years.
- The IAM negotiating team unanimously supports the deal, and will recommend that the union approve it by simple majority at a vote to be held later this week.
- IAM District 751 President Tom Wroblewski claims "important and substantial improvements over the company's last, best and final offer that was rejected on Sept. 3."
Okay, you can get all of the above from any news source. You come to the Fool to learn the investing angle on this news, right? So here goes:
First and foremost, this is an unmitigated good thing for Boeing shareholders in the short term. Regardless of what Boeing gave up at the talks, we can expect a relief rally, for the simple reason that Boeing can now get back to building planes and earning profits.
Boeing investors aren't the only ones dancing today. This strike has made itself felt across the land, as workers at Spirit Aerosystems (NYSE: SPR ) , BE Aerospace (Nasdaq: BEAV ) , Honeywell (NYSE: HON ) , and United Technologies (NYSE: UTX ) faced declining orders, slack production, and shift cuts necessitated by all the Boeing planes that went unbuilt and had no need of parts to build 'em.
Strike one, strike two ...
Settlement of the dispute may also head off a follow-on strike by Boeing's white-collar union, the Society of Professional Engineering Employees in Aerospace (SPEEA). These 21,000 Boeing scientists, engineers, manual writers, technicians, and other hourly workers are currently negotiating their own contract with Boeing, which comes up for a vote in mid-November.
As with the IAM negotiations, health benefits, pensions, and outsourcing are all expected to be on the table. But Doug Kight, HR VP at Boeing Commercial Airplanes, mentioned that historically, SPEEA contracts have imported the terms negotiated by IAM. So by ending the strike now, before the SPEEA votes, it seems likely (fingers crossed) that Boeing can avoid the dismal scenario of settling one dispute only to enter directly into another.
Moving sprightly on to the conspiracy theory aspect of this story, let's revisit the issue that was on everyone's minds before this strike stole the headlines: Boeing's Logistical Nightmare Liner, aka the "Boeing 787 Dreamliner." Fifteen months late for delivery before the strike began, it's now probably pushing into year-and-a-half late territory.
Whether Boeing will be able to use the strike as an excuse to invoke force majeure on its delivery contracts, as I surmised last month, remains unknown. But it does seem likely that with nearly two months of Boeing-induced downtime to work with, suppliers of 787 parts, including Goodrich (NYSE: GR ) , General Electric (NYSE: GE ) and others, may have had enough time to catch up on their work, so that 787 assembly can now proceed apace.
Foolish final thoughts
As Rodney King once opined, the world would be a better place if we could all just get along. Unfortunately, Adam Smith beat him to the punch by a good three hundred years, when he observed that in a capitalist society, people and companies always look out for -- and bargain for -- their own self-interests.
The good news here is that Adam Smith was right. Two parties went to the table in September, left it for a bit, returned for a visit, left again, then returned last week to finally agree on terms each can live with. Now it's time to get back to work, earn salaries, generate profits to plump shareholders' portfolios, and ... beat the pants off Airbus. Go Boeing!