Boeing shares rise on a possible end to the strike, but analysts are reserved
- Boeing shares rose 3% on Monday on hopes of an end to a crippling strike by the company’s workers.
- Some analysts have expressed doubt that the labor contract proposal presented over the weekend by the negotiating team will garner enough support from workers.
Boeing shares rise on a possible end to the strike, but analysts are reserved
About 33,000 workers will vote on the contract proposal on Wednesday after a more than month-long strike that has halted production of models including the best-selling 737 MAX narrow-body jet, Reuters reports.
The vote also coincides with the announcement of Boeing’s third-quarter results, which are expected to report a sizeable loss.
“We see the proposal as a positive step,” Ben Tsocanos, director of the aerospace industry at ratings agency S&P Global, told Reuters. “The rapid resolution of the strike is essential for improving the company’s financial position and supporting the rating.”
Moody’s declined to comment on the new proposal. Rating agencies have warned of a downgrade if the strike continues.
The new contract proposal announced Saturday includes a 35 percent pay increase over four years, a $7,000 ratification bonus, a restored incentive plan and increased contributions to workers’ pension plans, including a one-time contribution of 5 000 dollars plus employer contributions of up to 12%.
The new pay rise and ratification bonus is an improvement over the previous offer, which was rejected by striking workers, but the pay rises are still far short of the 40% wage increase over four years demanded by the mechanics’ union.
Wells Fargo’s Matthew Akers, who has a bearish view on Boeing shares, said the offer may not be ratified.
“Our analysis of more than 1,000 online comments suggests a more constructive view, but still not enough to pass,” Akers said in a note, also cited by Reuters.
He estimated that 20% were constructive about the latest offer compared to 3% about the previous offer, after analyzing comments on the IAM 751 Reddit forum, although he cautioned that the forum could be negatively influenced.
JPMorgan’s Seth Seifman estimated the wage increases could increase Boeing’s costs by more than $1 billion, while Jefferies analyst Sheila Kahyaoglu expects salary-related expenses of about $1.3 billion.
The latest proposal comes after weeks of sometimes acrimonious talks between Boeing and the International Association of Machinists and Aerospace Workers (IAM), whose leadership faced the ire of some members after approving Boeing’s first offer, which they opposed most workers.
The IAM did not explicitly endorse the latest offer, but told workers on Saturday it was “worth considering”.
However, even if the new contract is accepted by members, the planemaker still faces the challenge of quickly restoring production to pre-strike levels as workers return.
“Based on our analysis of previous Boeing strikes, it took an average of 6-12 months after the strike ended for production rates to return to pre-strike levels. Additionally, the impact the strike has had on the already fragile supply chain is uncertain,” RBC Capital Markets analysts said.
The shutdown halted production of the Boeing 737 MAX, a major source of revenue, and the 767 and 777 widebodies.
Source: www.mediafax.ro
