Machinists with Boeing agreed on Monday to a new four-year contract that will see wages rise as much as 43% over the life of the agreement.
The deal means production will resume at major Boeing (BA) facilities in the Seattle area, Portland and Los Angeles starting Wednesday.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
Both sides hope the deal will bring peace between the aerospace giant and the 33,000 members of Local 751 of the International Association of Machinists and Aerospace Workers.
The contract was approved by 59% of the 26,000 workers who voted on Monday.
"This is a victory, we can hold our heads high,” said Jon Holden, president of the striking machinists union local. “We achieved something that we hadn’t achieved the last 22 years.”
Related: Warren Buffett cuts Apple stake massively and artfully
Reality check for Boeing workers
There's also reality mixed in. Some workers told reporters they couldn't afford to keep striking, and some key contract goals weren't achieved.
Peace at Boeing, however, includes more than managers and workers simply getting along. It also means:
- Solving Boeing's massive production problems with its commercial airplane and defense businesses.
- Rebuilding customer confidence that Boeing will improve manufacturing quality and deliver new planes to airlines and defense customers on time.
- Convincing investors that Boeing can become profitable despite the huge costs implied in the new contract and $24 billion in capital recently raised to keep Boeing alive.
The first task is to get workers back to work.
The first are to arrive on Wednesday with everyone due back no later than Nov. 12.
The deal calls for wages to rise 13% in the first year and 9%, 9% and 7% in the final three years. Over the four-year term, Boeing says, average annual pay for machinists would rise to $119,309 from $75,608.
There's also a $12,000 signing bonus in two pieces: $7,000 cash and a one-time $5,000 contribution to employees' 401(k) accounts.
Related: Major homebuilder warns of new housing problem
The new contract does not include restarting Boeing's old defined-benefit pension plan. Not winning on the pension plan was a big reason for the 41% "no" vote on the contract.
There's also a commitment that the next plane Boeing develops will be built in the Pacific Northwest.
But many workers noted the commitment could end after the contract expires. Boeing is not developing any brand-new planes right now.
Boeing manufactures the 737 family of planes in Renton, Wash., near Seattle, and other planes in Everett, Wash. Its 787 Dreamliner is built near Charleston, S.C.
New Boeing CEO gets a deal done
Getting the deal done is a win for new Chief Executive Kelly Ortberg, who joined Boeing on Aug. 8. He understood that management/union relationships were frayed.
Ortberg has committed to working from Seattle, where the company was founded in 1916. He has even bought a house in the city.
Boeing's top management had moved headquarters to Chicago in 2001 and then to suburban Washington, D.C., in 2022.
Related: Why so many retail stores are still closing
It's unclear whether the entire headquarters will return to Seattle.
Repeated rejections of contract proposals caused Ortberg to warn that the next proposal might be weaker if workers rejected the deal on Monday.
But he struck a conciliatory note after the union vote, saying in a statement, "While the past few months have been difficult for all of us, we are all part of the same team. We will only move forward by listening and working together."
Still there remains a lot of pain ahead. The company is laying off some 17,000 workers out of a work force of 170,000.
And all that cash Ortberg raised means Wall Street has made a big bet on the CEO succeeding — where several predecessors could not.
At Monday's $155.07 close, Boeing shares were down 65% from their peak close of $440.62 in 2019. They were down as much as 44% for this year on Oct. 14 when the price hit a low of $146.02. That was the day after 64% of union members rejected Boeing's third contract offer.
(The first contract proposal received only 6% support; the union refused to put the second to a vote.)
At last check Boeing shares were trading off 0.8% at $153.83.
Passengers may still be skittish about Boeing
Boeing was the subject of several federal investigations after a door plug blew off a 737 Max plane during an Alaska Airlines flight in January.
Regulators then put limits on Boeing airplane production, saying the limits would last until they felt confident about the company's manufacturing safety.
The door-plug incident renewed concern about the safety of the 737 Max. Two of the planes crashed less than five months apart in 2018 and 2019, killing 346 people.
For some time afterward, some passengers refused to get on Boeing-built planes. Indeed, Boeing's woes have benefitted rival Airbus SE (EADSY) , the European plane maker.
Related: Veteran fund manager sees world of pain coming for stocks
