Boeing mechanical engineers reject new labor contract and lengthen strike that lasts greater than 5 weeks

People hold signs during an International Association of Machinists and Aerospace Workers (IAM) strike rally at the Seattle Union Hall in Seattle, Washington, on October 15, 2024.

Jason Redmond | AFP | Getty Images

Boeing Machinists voted against a new labor contract that would provide 35% wage increases over four years, their union said Wednesday, extending a more than five-week strike that has halted most of the company's aircraft production, which is concentrated in the Seattle area brought.

The rejection of the contract by 64% of voters is another major setback for the company, which warned Wednesday that it will continue to burn cash through 2025 and reported a quarterly loss of $6 billion, its biggest since 2020.

The strike is costing the company about $1 billion a month, according to S&P Global Ratings.

New CEO Kelly Ortberg had said reaching an agreement with machinists was a priority to get the company back on track after years of safety and quality problems.

“My focus is on getting everyone moving forward, getting them back to work and improving that relationship,” Ortberg told CNBC's “Squawk on the Street” earlier in the day when asked about the strike.

Ortberg has laid out his vision for Boeing's future, which could include streamlining the company to focus on its core business. Earlier this month, he announced that Boeing would cut 10% of its 170,000 global workforce.

Boeing's more than 32,000 machinists in the Puget Sound area, Oregon and other locations walked off the job Sept. 13 after overwhelmingly voting against an earlier tentative agreement that included 25% pay raises. The International Association of Machinists and Aerospace Workers union had originally called for a 40% wage increase. It is the first strike by machinists since 2008.

The latest proposal, announced last Saturday, included a 35% raise over four years, an increase in 401(k) contributions, a $7,000 bonus and other improvements.

Given the rising cost of living in the Puget Sound region, workers had pushed for higher wages. Some machinists were upset about losing their pension benefits in a previous contract they signed in 2014, but the latest proposal did not include a pension.

In the new contract, Boeing agreed to build its next plane in the Pacific Northwest, which has also been a point of contention for union workers after Boeing moved all 787 Dreamliner production to a non-union factory in South Carolina.

“We have made tremendous progress with this agreement. However, we have not accomplished enough to meet the demands of our members,” Jon Holden, president of IAM District 751, said at a news conference Wednesday evening. He said the union would push to return to the bargaining table.

Boeing declined to comment on the voting results.

The labor dispute is the latest in a long list of problems at Boeing that began the year when a door plug flew out in mid-air from a crowded Boeing 737 Max 9, its best-selling plane, drawing renewed scrutiny from regulators over the company.

The strike began as Boeing worked to ramp up production of the 737 and other aircraft.

The extended shutdown also poses a challenge for the aerospace supply chain, which is fragile in the wake of the pandemic as the company's supplier network has had to quickly train new workers.

Spirit AeroSystems Last week it announced that about 700 workers would be temporarily furloughed and that layoffs or other furloughs were possible if the Boeing engineering strike continued.