Boeing’s leaders have few options as they consider the potential damage of the Machinists’ rejection Wednesday of another bid to end the six-week strike.

They lack the leverage they had in the contract talks just over a decade ago.

In November 2013, the day after the Machinists delivered a resounding rejection in the first vote on a Boeing contract offer, company executives flew out to meet in person with state officials across the country to explore where else it might manufacture the newly launched 777X.

It was an ostentatious pressure tactic against its blue-collar workforce in the Pacific Northwest, a signal that Boeing’s leadership was ready to wield an ax to the future of aerospace in Washington state.

Eleven years later, after another emphatic rejection of Boeing’s latest contract offer, it’s the union that has the leverage.

For Boeing, waiting until the Machinists give in from the impact of lost income is probably not a viable option. Before then, Boeing’s own financial distress would intensify and its already-stressed supply chain could sustain long-term damage.

“This rejection adds further uncertainty, costs, and recovery delays as the strike approaches day 40,” Bank of America analyst Ron Epstein wrote in a note to investors Thursday. “We anticipate further concessions of wages will be required for a deal to pass.”

And Ken Herbert, an analyst with RBC Capital Markets, after the contract rejection told investors that “the clock is ticking for Boeing.”

“The potential impact of the strike on the supply chain is becoming a greater concern,” he wrote. “The sense of urgency at Boeing to end the strike is increasing.”

Scott Hamilton, founder of aviation consulting firm Leeham.net, says Boeing has no choice but to give more to the Machinists.

“Will they have to come through and make a new offer? Well, obviously they will,” he said.

A cash cushion

Boeing’s financial position, outlined in its quarterly earnings report on the day of the vote, is tottering on the verge of a credit downgrade that would increase the cost of borrowing.

The company bled $2 billion net in cash during the quarter and its debt rose to $57.7 billion with just $10.5 billion of cash in hand. Chief Financial Officer Brian West said 2025 will also see a net cash outflow.

However, Boeing has moved to shore up its finances and survive this cash crunch. The company earlier this month arranged $10 billion in additional credit and a potential sale of stock and stock-related bonds up to a further $25 billion if needed.

That funding is enough to cover the cash outflow and the debt maturities falling due, and to provide a cushion of capital needed if the strike is prolonged. Boeing will tap that if needed to stave off a credit downgrade.

“It eases the pressure off Boeing to avoid having their hand forced,” said Hamilton. “It gives them more time to try to negotiate something.”

In a regulatory filing Wednesday, Boeing said “We expect to be able to access capital markets when we require additional funding in order to pay off existing debt (and) address further impacts to our business related to the strike.”

Still, Boeing would much prefer to do that stock and bond sale after the strike is finished. Investors would pay more for the stock if they can see some movement toward stability.

And that same filing notes the risk that if “the strike continues for a prolonged period, our financial position, results of operations and cash flows would continue to be adversely impacted … (and) could negatively impact our ability to achieve our strategic objectives.”

Impact on suppliers

Another impact of the strike could be more severe: If Boeing isn’t building jets, it cannot continue indefinitely paying suppliers for parts.

That could bring layoffs at suppliers and long-term damage to Boeing’s supply chain.

Because of the strike, major supplier Spirit AeroSystems of Wichita, Kan., has already implemented a three-week unpaid furlough for 700 employees.

Spokesperson Joe Buccino said that if the strike extends into the week of Thanksgiving, “it would certainly mean some measure of layoffs and additional furloughs.”

Kevin Michaels, a supply chain expert with Aerodynamic Advisory, said Washington state has a lot of smaller suppliers heavily dependent on Boeing business.

“A significant number are going to be affected if the strike is prolonged and some severely,” Michaels said. “It could cause some suppliers to fail.”

Daniele Cagnatel, CEO of Sekisui Aerospace, with about 600 employees in the state, said his firm supplies both Boeing and its smaller suppliers. He is concerned that Boeing will have to significantly reduce or even halt the flow of incoming parts.

The consequences of doing that can be far-reaching.

Cagnatel said Boeing learned during the COVID-19 pandemic that when it reduced deliveries to zero, the resulting layoffs at suppliers meant lost capacity when employees failed to return.

“They realized how difficult it is to train and maintain people,” he said.

Up to now Boeing has been working with Cagnatel, trying to ensure he still has parts to make and can maintain his workforce.

Yet if the strike goes on much longer, it could be difficult for Boeing to maintain demand at its suppliers, especially the smaller ones.

“If the reduction goes beyond a certain level, then we have no choice, we will have to also take actions in reduction of personnel,” Cagnatel said. “Right now, I have to wait and see. There’s not much we can do at this moment.”

Michaels added that eventually, post-strike, Boeing needs to ramp up production considerably. At that point, suppliers must have the working capital to invest in more raw materials and machinery and have the workers to make the parts.

“It’s really challenging to get the rates back up,” he said. Suppliers weakened by lack of capital or a shortage of skilled workers coming back from layoff may be unable to do it.

Settling the contract is essential to avoid such long-term effects from the short-term shock of the strike.

What next?

After its members voted to reject Boeing’s offer, the union is standing firm and says it wants to resume talks with the company.

“After 10 years of sacrifices, we still have ground to make up, and we’re hopeful to do so by resuming negotiations promptly,” Machinists District 751 President Jon Holden said in a statement.

Holden emphasized that the reluctance to settle for less is a consequence of that forced contract 10 years ago when the Machinists’ pensions were frozen and they got minimal pay increases long since swamped by inflation.

“We will continue to negotiate in good faith until we have made gains that workers feel adequately make up for what the company took from them in the past,” he said.

A number of the Machinists have demanded no settlement unless the pension is restored.

Boeing insisted again Thursday that there’s “no scenario” where that would be granted. Analysts estimate funding a traditional pension would require about $1.5 billion a year of Boeing.

Leeham.net’s Hamilton said he doesn’t think Boeing “will ever blink on the topic of the pension.”

To make up for that, he said Boeing will just have to give more on other issues.

Hamilton suggests incremental changes across the contract: bump up the wage increase from 35% over four years to 40%; add higher contributions to the 401(k) retirement plan; raise the signing bonus up from $7,000; add more vacation time and sick leave.

Additionally, he thinks that to attract and retain workers Boeing should raise the low pay for new machinists more than the latest offer does.

A basic Grade 4 mechanic working second shift with two years seniority has base pay currently of $26.50 an hour. The latest offer would bump that up in the first year to $29.68.

“These are highly complex, technical, skillful jobs. Why do you pay them just a little bit more than McDonald’s?” Hamilton asked.

While South Carolina is still building 787s, there’ll be no other Boeing planes built until a settlement is reached. However Boeing wants to package it, the only way forward seems to be an improved offer to the Machinists.

No date has yet been set to resume negotiations.

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