This Labor Strike Just Cost 10% of Boeing's Workers Their Jobs

Boeing's labor strike entered its sixth week on Friday. With 33,000 workers from the International Association of Machinists (IAM) off the job and on the picket lines, Boeing (NYSE: BA) production of 737, 767, and 777 airliners is shut down and, according to even the most conservative estimates, Boeing is losing $1 billion a month as the strike drags on. (Other estimates rise as high as $1 billion a week.)

With IAM's rejection of Boeing's offered 25% pay raise, and the union's refusal to consider a Boeing "best and final" offer of 30%, you might think that the pressure on Boeing to settle this strike is becoming unbearable.

But something just changed -- and now I believe the advantage favors Boeing.

Is Boeing or is the union "the bad guy" in this debate? That depends on whom you ask. But ask any of the 17,000 Boeing workers who are about to lose their jobs, and it's likely they'll blame IAM.

On Friday last week, new Boeing CEO Kelly Ortberg circulated a memo within the company explaining that the IAM labor strike has put Boeing in "a difficult position" that's forcing management to make "difficult decisions." Among these decisions, Boeing will delay introduction of its new 777X airliner (which was to be built in Washington state, where the strike is happening), by about a year, to 2026.

The company will also shutter its 767 Freighter program, effective 2027, once it has completed production of the 89 Boeing 767s it has under contract. (Production of KC-76 aerial refueling tankers for the Air Force, which are based on the 767 design, will continue -- so it's possible the 767 will be revived in the future.)

Worst of all, Ortberg announced that Boeing will need to "reset our workforce levels to align with our financial reality and to a more focused set of priorities." And specifically, Boeing will "reduce the size of our total workforce by roughly 10 percent" -- 17,000 workers.

Admittedly, not all of this is the union's fault.

Boeing management did itself no favors when it bid low on the KC-76 contract back in 2011. The resulting losses dog Boeing to this day -- one big reason why Boeing's Defense and Space (BDS) business is now losing money, and will continue losing money as Boeing continues building KC-76s for the Pentagon.

And speaking of space, that side of Boeing has suffered unforced errors as well. These include multiple glitches on its Starliner spacecraft, and an overdue and overbudget Space Launch System that (NASA says) both arise from "a recurring and degraded state of product quality control" and a "lack of a sufficient number of trained and experienced aerospace workers at Boeing."