So, the machinists at aerospace stock Boeing (BA) have been back to work for a few weeks now, and, for the most part, Boeing is back to normal. Well, what passes for normal at Boeing anymore. One thing we have not much considered, however, is the contracts that finally got Boeing back to work.
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A Reuters report recently examined each of the offers and, ultimately, the one that was accepted. So today, we take a look at those contracts, now just a few weeks old, and see what flew and what did not in the meantime.
“Our Last, Best Offer,” Part One
First, there was the offer from September 12. The union endorsed this four-year contract, but a whopping 95% of workers did not feel the same. Boeing offered a $3,000 signing bonus per employee and a general wage increase of 25%. It also offered a 401k retirement package that featured a 75% match of the first 8% an employee put in.
The company would also automatically chip in 4% to the program and pledged to build the next commercial jet in Seattle, as long as the program launched within the term of the contract. However, Boeing did take along with this give, removing an “annual performance bonus” from the operation.
It is little surprise this contract failed as hard as it did. It not only refused to even entertain the notion of a pension, which many workers wanted, but it also only offered a wage increase that was slightly more than half of the 40% workers wanted over that four-year period. Given that inflation has been running at an average of 4.875% over the last four years–with 2020 featuring a crippling 7%–the proposed wage hike would have struggled to keep pace with inflation alone.
Offer, Part Two
October 23, meanwhile, saw a new offer, though Boeing did not go so far as to declare this the “last best offer again.” But it did draw quite a bit more interest, as this time, only 64% of employees rejected the four-year offer. This was the only offer that the union did not endorse, either.
It featured a wage increase of 35% over the next four years, a $7,000 signing bonus, the promise to build the next jet in Seattle, and the return of an annual performance bonus. Pensions, however, were still off the table, but Boeing sweetened the 401k pot with 100% matching on the first 8% paid in, along with an automatic 4% contribution.
Some believed that the lack of a pension in this offer was what cost it much of its support. Older workers, who would not have had the time required to benefit from such a move, would have benefitted far more from a fixed payout arrangement. Younger workers who have time on their side would benefit much more from the matching 401k plan.
Part Three: An Offer You Can’t Refuse
That was when the gloves came off, and CEO Kelly Ortberg briefly channeled Don Vito Corleone, declaring that the next offer “would be regressive.” This was indeed Boeing’s best offer, and failing to take it this time would result in a worse offer next time. Employees took Ortberg at his implication on this one and approved the contract by 59%. The union got behind this contract, meanwhile, and seemed about as cowed as a union gets.
This time, Boeing offered a 38% raise over the next four years, which baffled many; why not just give the 40% they asked for if you were planning to give just short of that? Perhaps it was a symbolic measure, a demonstration that Boeing would not completely knuckle under. But Boeing threw in a $12,000 signing bonus, the performance bonus with an “annual guaranteed payoff of 4%”, along with the last agreement’s 401k contribution scheme and the pledge to build the next jet in Washington.
Is Boeing a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 15 Buys, six Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 32.09% loss in its share price over the past year, the average BA price target of $193.38 per share implies 26.89% upside potential.
