Monday 08 September 2008
by: Chang-Ran Kim and Tim Hepher, Reuters
Boeing employees prepare for what could be a long strike. (Photo: Getty Images)
Tokyo - Aerospace groups worldwide are preparing for what could be a lengthy strike at Boeing, and one of the aircraft manufacturer's biggest outside suppliers has lost no time in cutting production and working hours.
Three days after 27,000 Boeing machinists walked off the job, bringing assembly of the world's top-selling airliners to a halt, Spirit AeroSystems Holdings suspended its 2008 financial guidance Monday and said it was cutting volume on some Boeing products.
The former Boeing unit, based in Wichita, Kansas, is one of the world's largest suppliers of airframe structures. It said it had managed to get through a Boeing strike in 2005 by putting employees on a shorter workweek instead of stopping production.
It said it would once again revise its production and delivery schedule with a reduced workweek.
Economists have warned that the strike, which began Saturday, could affect businesses around the Seattle area, where Boeing's commercial assembly plants are located, and dent the U.S. economy by widening the trade deficit.
Shares in Boeing were up 0.4 percent, lagging well behind a global stock market rally, driven by the bailout of Fannie Mae and Freddie Mac.
Shares in EADS, parent of Airbus, Boeing's archrival, closed up 3.6 percent in Paris, exceeding the 3.2 percent rise in the benchmark CAC-40.
The strike by the International Association of Machinists and Aerospace Workers, their fourth in 20 years, threatens to cost Boeing $100 million a day in revenue and is expected to cause problems for many suppliers across the world in the increasingly global aerospace business.
"My big worry is that historically Boeing strikes tend to be protracted," said Howard Wheeldon, senior strategist at BGC Brokers in London.
Any prolonged strike will have a rapid effect on companies that produce parts and engines for existing models like the popular single-aisle 737 jet or the long-range 777, and could eventually push back the 787 Dreamliner, which has already been hit by delays.
Shares in Groupe Latècoëre, a French company that makes doors and other structural components for Boeing and Airbus, fell about 2 percent before recovering to close nearly unchanged.
Finmeccanica of Italy, whose Alenia unit is a major partner on the 787, fell 1 percent.
Boeing itself is cushioned by a $4.1 billion profit last year and a record $275 billion worth of commercial plane orders, but analysts say each day of the strike will shave a cent per share off its annual profits.
The machinists, Boeing's largest union, struck for 48 days in 1989, 69 days in 1995 and 28 days in 2005.
The machinists are protesting not only Boeing's contract offer but also what they see as plans to shift more jobs to non-union and foreign companies.
Some were angered by a union decision to allow two days of extra talks after an overwhelming strike vote.
"It's not about the money, it's all about the subcontracting wordage," said Butch Blount, a 53-year-old motor equipment operator who was handing out cookies to fellow strikers outside Boeing's vast plant in Everett, Washington, on Sunday.
Boeing has significantly widened its base of suppliers for its newest plane, the 787 Dreamliner, which is being made by companies around the world and assembled in Everett.
Meanwhile, the new freighter version of Boeing's popular long-range 777, which has 75 orders and is set for first delivery in the fourth quarter, faces delays.
So does early production work on Boeing's new jumbo jet, the 747-8.
Airlines have been quiet so far on the effects of the strike.
Singapore Airlines, which has 20 of the 787s on order for delivery starting in 2011, said it was in talks with Boeing over how the walkout might affect deliveries.
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Tim Hepher reported from Paris.
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