Boeing faces strike threat as workers vote on new contract

Boeing workers are voting on a new labor contract Thursday, setting up the potential for a crippling strike that the company’s CEO said would jeopardize the struggling plane-maker’s recovery.

The tentative agreement that the International Association of Machinists and Aerospace Workers and the company unveiled on Sunday included 25% wage increases and other improvements to health-care and retirement benefits. Boeing also committed to build its next aircraft in the Seattle area, after it moved production of the 787 Dreamliner to a non-union factory in South Carolina.

But some workers have said they plan to turn down the contract and that they’re seeking bigger wage increases, citing a surge in the cost of living in the Seattle area.

The vote is the first major test for CEO Kelly Ortberg, who said in a staff note Wednesday that he has talked with employees about the contract in Renton, Washington, and Everett, Washington, where Boeing’s main factories are located.

Ortberg is just over one month into his role in the manufacturer’s top job, and has been tasked with steadying aircraft production and stamping out safety lapses and quality flaws in the wake of a door-panel blowout at the start of the year.

“I know the reaction to our tentative agreement with the IAM has been passionate,” he wrote in his staff note. “I understand and respect that passion, but I ask you not to sacrifice the opportunity to secure our future together, because of the frustrations of the past.”

Jefferies aerospace analyst Sheila Kahyaoglu estimated in an Aug. 29 note that a 30-day cash impact from a strike could be a $1.5 billion hit for Boeing and said it “could destabilize suppliers and supply chains.” She forecast the tentative agreement would have an annual impact of $900 million if passed.

The union, which represents about 33,000 Boeing factory work ers in the Seattle area and in Oregon had sought pay raises of some 40% from Boeing. The 25% increase in the tentative agreement would be in line with the United Auto Workers’ deal last year that followed strikes at Ford,General Motorsand Chrysler parentStellantis.

If approved, the Boeing deal would follow a series of union-negotiated pay increases across industries from Hollywood to airlines.

It would be Boeing workers’ first negotiated contract with the company in 16 years.

“We have achieved everything we could in bargaining, short of a strike,” IAM District 751 President Jon Holden wrote to members on Monday. “We recommended acceptance because we can’t guarantee we can achieve more in a strike. But that is your decision to make and is a decision that we will protect and support, no matter what.”

Top pay for IAM workers at Boeing would rise to $57.43 an hour as soon as the new contract goes into effect. Including some cost-of-living adjustments, increases could rise by more than 42%, according to the union. Boeing said average annual machinist pay is currently $75,608, which would rise to $106,350 at the end of the four-year contract.

If the deal is rejected and two-thirds of workers vote in favor of a strike, a work stoppage would begin after midnight in Washington state on Friday. If less than two-thirds vote to strike after the contract is rejected, the contract would automatically go into effect, the union said.

“For Boeing, it is no secret that our business is in a difficult period, in part due to our own mistakes in the past,” Ortberg said in his note. “Working together, I know that we can get back on track, but a strike would put our shared recovery in jeopardy, further eroding trust with our customers and hurting our ability to determine our future together.”

Polls are set to close at 6 p.m. PT.

—CNBC’s Phil LeBeau contributed to this report.