Boeing’s strike is over, but its problems are not

LABOR

Challenges include quality control, managing debt

Members of District 751 of the International Association of Machinists and Aerospace Workers in Seattle wait to hear the results of a vote to end the Boeing strike on Monday night. M. SCOTT BRAUER — THE NEW YORK TIMES

Boeing’s 737 Max 8 planes are worked on at the Renton Municipal Airport in Renton, Wash., in 2019. RUTH FREMSON — THE NEW YORK TIMES

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By Niraj Chokshi

The New York Times

After nearly two months on strike, some 33,000 Boeing employees will return to work over the next week. But getting the troubled manufacturer back on track will take a lot longer.

Even before the strike began on Sept. 13, Boeing faced challenges, including a quality crisis, mounting debt and supply chain chaos. The Monday vote by union members to accept a contract and end the strike will put the focus back on how the company and its new CEO, Kelly Ortberg, plan to address those festering problems.

“Resolution of the strike was low-hanging fruit,” Jonathan Root, a senior vice president for Moody’s Ratings, said in a statement Tuesday.

Here’s a look at some of the items at the top of Ortberg’s to-do list:

Improve quality

Ortberg joined Boeing in August, inheriting a company in trouble.

In January, a panel blew off a 737 Max plane during an Alaska Airlines flight, resurfacing concerns about the quality and safety of Boeing planes five years after two fatal Max crashes. The Federal Aviation Administration increased oversight of the company and limited production of the jet.

Boeing is working to improve quality, including adding more inspections internally and at its suppliers. The company is giving employees more training, simplifying plans and procedures, and reducing the amount of work performed out of sequence to minimize the risk of mistakes.

But that work will take time to bear fruit and Boeing will need to show the FAA that it is making progress if it wants the regulator’s permission to increase production beyond a limit imposed after the January incident.

Make more jets

The strike has been particularly damaging for Boeing because most of the 33,000 union members help make most of its commercial airplanes. The walkout brought that work to a standstill, taking a financial toll on the company, the region and the U.S. economy.

The strike cost Boeing about $6.5 billion in lost earnings through October, according to the Anderson Economic Group, a research and consulting firm in Michigan. Those losses total about $11.5 billion when including costs to workers, suppliers, customers and the Seattle region.

Boeing was trying to increase production of the Max, its most popular and lucrative commercial plane, before the strike. Restarting production will be slow. Workers have until Tuesday to get back to work. Some will require retraining and it could be weeks before operations are running smoothly.

“Historically, post-strike productivity takes a couple months to recover and given the heightened focus on quality and safety, we are not expecting anything shorter,” Myles Walton, an analyst at Wolfe Research, said in a research note.

Stabilize the business

Boeing also has faced mounting debt and rising costs in recent years.

In October, Ortberg announced plans to restructure the company, including by cutting about 17,000 jobs, or 10% of Boeing’s global workforce. Last week, Boeing raised more than $21 billion by selling shares to investors to strengthen its financial position and stave off the loss of its investment-grade credit rating.

Boeing still has to complete work on fixed-price government contracts that have become a financial strain because the company’s costs have increased more than expected. It needs to work with the FAA to get a handful of delayed commercial airplanes certified. And Ortberg also has said he is looking to streamline Boeing’s sprawling operation, which could mean jettisoning some businesses, including perhaps some of its space programs.

“It’s something a new CEO always does when you come into a business,” he told investors last month. “What do we want this company to look like five and 10 years from now? Do these things add value to the company or distract us? So, I’m in the process of going through that.”

Catch up to Airbus

Boeing was the dominant manufacturer of commercial airplanes for decades. But that changed a few years ago. More passenger planes in use today were made by the company’s main rival, Airbus.

Regaining the ground Boeing has lost will not be easy. And doing so will probably rest on whatever jet the company makes next, a program Ortberg is expected to oversee.

If plans for that next plane come together in the next four years, the company will have to carry out that work in the Seattle area, under its new labor contract. That was an important concession to the International Association of Machinists and Aerospace Workers. Many of the union’s members still are angry that the company years ago moved production of the 787 Dreamliner to a factory in South Carolina where workers are not unionized.

“They’ve never given us a commitment for an airplane program before it’s launched, before it’s designed,” Jon Holden, president of District 751 of the union, which represents most of the workers covered by the contract, said Monday.

But rolling out a new plane is a complex process. Manufacturers produce versions of the same jet for decades. That means they have to plan way ahead, including making sure airlines will keep buying the model for a long time.