But That Delay Could Help One Troubled Program

As workers represented by the International Association of Machinists began their first week walking the picket lines outside Boeing plants in Washington, Oregon and Kansas, analysts and industry pundits seem to agree the walkout will last at least a month... but after that, it's anybody's guess.

If history is a guide, the strike won't last much longer than a couple of months. Bloomberg reports IAM has walked out over three of its last six contracts with Boeing, ranging from 28 to 68 days.

"I would expect this one's going to be long," said longtime Seattle-based aviation consultant Scott Hamilton. "There are some pretty serious issues that they're pretty far apart on."

As ANN reported, Boeing offered machinists an 11 percent raise over three years, as well as bonuses and a double-digit percent gain in pension payments. Union workers wanted a 13 percentage raise, and concessions from Boeing involving limits to outsourced manufacturing. The IAM also called for a stronger health plan, and guarantees from the planemaker that new hires would receive similar benefits to their more tenured counterparts.

IAM workers overwhelmingly rejected the Boeing contract last week... and both sides have adopted a harsh line. On the surface it appears Boeing and IAM are indeed far apart on several issues; how much of that is substantive, though, remains to be seen... and time may be the only force able to cut through the bombast.

"It's hard to tell what's posturing and what's an unbridgeable gap," said noted Teal Group analyst Richard Aboulafia. "In a few weeks, cooler heads might begin to reassess," though he also acknowledged the latest strike "seems a little worse than most."

Boeing appears well-positioned to weather the storm in the short-term. The company has healthy cash reserves, stemming from three consecutive years of record sales and healthy delivery backlogs. Conversely, Boeing isn't able to collect full payment on its planes until they're delivered... and with lines shut down for the foreseeable future, few deliveries are imminent.

Analysts say Boeing's inability to deliver aircraft adds up to about $100 million in losses for each day the strike wears on. A significant chunk of that total comes from lost revenue, though much of it also comes from running idle plants and continuing to pay non-IAM workers.

If there's one bright side for Boeing, however, it is that the planemaker will not need to compensate customers for additional delays caused by the strike.  Such provisions are common in airliner purchase agreements... and for one Boeing program, it could be a blessing in disguise.

The longer the strike wears on, the better the chances Boeing will be forced to once again delay deliveries of its troubled Boeing 787 Dreamliner. Unless the strike is resolved this week, it already seems likely the first 787 flight -- currently scheduled for November -- will be pushed off until after the first of the year.

While such a delay would be yet another black mark for the troubled composite-bodied airliner, the strike also gives Boeing some additional breathing room in allowing its suppliers to catch up on parts deliveries... essentially free time at that, since Boeing wouldn't have to pay eager customers additional concessions for missed deadlines.

Machinists maintain that if Boeing hadn't outsourced production of so many components of the 787, however, the company wouldn't need to now weigh out the pro's and con's of such a scenario in the first place.

"It was a major mistake for the company to fall so far behind on this program," striking machinist Dewayne Roberts said of the 787, to the Seattle Post-Intelligencer. "If we had built it, the 787 would be flying by now."

FMI: www.boeing.com, www.goiam.org