Everett, Wash.
Published: Tuesday, September 9, 2008

Long strike at Boeing may hurt U.S. exports

A regional analyst says the economy of the greater Seattle area can weather a month or so.

By Tim Klass
Associated Press

 SEATTLE -- If the Boeing strike drags on for more than three months, there could be long-lasting harm to the country's exports, economists said.

By dollar value, the Boeing Co. ranks at the top of the nation's leading industrial exporters. Exports are one of the few bright spots in the nation's economy. But that could change if the walkout runs beyond three months and customers are spooked, eventually turning to Chicago-based Boeing's European rival, Airbus, for future orders of commercial passenger and cargo jets.

Few expect the strike to last that long.

Besides, analyst Cai von Rumohr at Cowen and Co. noted Monday that Airbus has a four- to seven-year backlog and thus is in no position to take any of Boeing's orders in the near term.

The last two strikes by the International Association of Machinists and Aerospace Workers at Boeing's commercial aircraft operations lasted 24 days in 2005 and 69 days in 1995. The latter was the longest at Boeing since a 140-day strike in 1948.

In general, Boeing receives about 50 percent to 60 percent of the purchase price on delivery, the rest coming earlier in payments negotiated separately with each order, said Richard Aboulafia, vice president and analyst for the Teal Group in Fairfax, Va. List prices range from $50 million to $57 million for a 737-600 to $285.5 million to $300 million for a 747-8.

Boeing failed to deliver more than two dozen planes on schedule during the walkout three years ago. This time, with about a seven-year order backlog and a scheduled delivery rate of more than 40 planes a month, the company stands to lose $100 million to $110 million a day in deferred revenue by most analysts' estimates.

"If it's a month long, you'll definitely see a blip" in trade gap figures, Aboulafia said. "Two months isn't the end of the world."

But he said four months would make customers wonder, " 'Why can't they settle it? What's going on?' "

Even in the economy of the greater Seattle area, home to 25,000 of the 27,000 electricians, painters, mechanics, riveters and other hourly production workers represented by the Machinists, a one-month strike "really has a negligible impact," said Dick Conway of Dick Conway & Associates, an economist and regional economic forecaster.

Up to three months or so, Conway said, buyers are likely to cut Boeing the same kind of slack the manufacturer has shown in accepting delays and renegotiating terms for airlines during severe downdrafts in air travel.

As of Monday, Tim Healy of Boeing and Connie Kelliher of Machinists District Lodge 751 in Seattle said both sides were ready to resume negotiations at any time, but no talks were scheduled.

Union members voted 80 percent on Wednesday to reject Boeing's last contract offer and 87 percent to go on strike the next day, but both sides agreed to extend the old contract for 48 hours in a last-ditch bargaining effort with a federal mediator at the table.

The strike began Saturday morning after that deadline expired without an agreement.
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