OK. Here goes: Boeing should not fear the strike. In fact, Boeing might even welcome it.
Hold on there, Tex. That's a little too crazy.
Bear with me for a moment. You see, the conventional wisdom holds that Boeing is in crisis today. Yesterday, 27,000 Boeing-employed members of the International Association of Machinists cast votes for and against (a) rejecting Boeing's offer of more than $30,000 in additional pay and benefits, and (b) declaring a strike because this offer was so un-"exceptional."
The results were strange: 80% of union workers voted to reject Boeing's offer; 87% wanted to strike over it. The union argues that Boeing's offer falls short in several key respects:
- It offers a total of 11% in pay increases over three years (5% in year one, 3% more in years two and three). The union wants at least 13% total.
- Certain "other benefits" are reduced, and employees are asked to bear a larger portion of their health-care costs.
- Finally, the union wants guarantees of "job security" and less outsourcing from Boeing.
The upshot of all this is: The union is prepared to strike. It's authorized to strike. Heck, that 87% figure tells us it's downright eager to strike. But it's given Boeing 48 hours to improve on what Boeing has already said was its "best and final" offer.
Why the delay?
Well, the union hopes that Boeing wasn't entirely candid about its offer being truly "best and final." Workers know that Boeing earned more than $4.2 billion over the past year, and with a backlog of more than 3,400 aircraft awaiting construction, they know it's a safe bet that Boeing can afford to pay more than it actually wants to pay. In short, they're hoping that management will weigh the consequences of a strike -- $100 million a day in lost revenue, or more than $6 million a day in lost profit -- and see the light.
They may be right ...
A little back-of-the-envelope mathematics explains the logic. The two-percentage-point difference separating Boeing's offer and the union's demand works out to about $35 million a year in additional salary for Boeing's 27,000 machinists. So it takes only six days of work stoppage for Boeing's benefits of scrimping on salaries to get outweighed by the costs of lost profits.
... Or I may be crazy
Here's how I think Boeing could benefit in permitting the strike to go forward: First and foremost, Boeing saves some money -- and Lord knows it could use it. Much political hay has been made of the company's $4.2 billion in annual profits, sure, but with a profit margin of just 6.3%, Boeing actually earns less per revenue dollar than fellow aeronautical giants like Lockheed Martin
Secondly, by standing pat, Boeing preserves credibility. It said that 11% was its final offer. Back down now, and similar language in future negotiations will have little credibility.
Third and finally (and here's the crazy part) ... here's a trivia question for you: What's Boeing's biggest headache right now?
Right: its Logistical Nightmare Liner, aka the "Boeing 787 Dreamliner." Fifteen months late for delivery (and counting), Boeing risks getting dinged with penalty payments for tardy delivery to customers who've already ordered planes. But perhaps Boeing could dodge those penalties, if, say, failure to deliver on time was caused by events outside of its control.
There's a phrase for that
If Boeing has a "force majeure" clause in its contract, a legal concept present in most well-drafted sales contracts, that could excuse its failure to perform (say, by not delivering planes when it promised to) because of events outside its control (say, a strike).
Recent financial history is replete with examples of companies using force majeure to gain wiggle room on their contractual obligations. ExxonMobil
By standing pat and allowing a strike to go forward, Boeing could conceivably save itself millions in "late fees" it would otherwise owe to its customers -- perhaps even save enough to offset the profits lost because of a work stoppage. Meanwhile, as Boeing machinists sit idle and watch their bank accounts dwindle, Boeing's subcontractors -- who by all accounts are the primary reason for production delays at the 787 project -- could continue working out the kinks in Boeing's supply chain.
When all's said and done, I suspect a strike could actually work out to Boeing's advantage. Crazy idea? Sure. But maybe just crazy enough to work.
Read more about Boeing's supply chain train wreck in: