Strike is over but troubled Boeing still faces many challenges

SEATTLE

Factory workers at Boeing have voted to accept a contract offer and end their strike after more than seven weeks, clearing the way for the company to restart idled Pacific Northwest assembly lines.

But the strike was just one of many challenges the troubled U.S. aerospace giant faces as it works to return to profitability and regain public confidence.

Resuming production will allow Boeing to generate much-needed cash, which it has been bleeding.

“Even for a company the size of Boeing, it is a life-threatening problem,” said Gautam Mukunda, lecturer at the Yale School of Management.

As the machinists get back to work, management will have to address a host of other problems.

The company needs to get on better financial footing. But while doing so, it also needs to prioritize the quality of its workmanship and its relationships with employees and suppliers, analysts said.

Boeing has been managing itself to meet short-term profit goals and “squeezing every stakeholder, squeezing every employee, every supplier to the point of failure in order in order to maximize their short-term financial performance,” Mukunda said.

“That is bad enough if you run a clothing company. It is unacceptable when you are building the most complex mass-produced machines human beings have ever built.”

Above all, Boeing needs to produce more planes. When workers are back and production resumes, the company will be producing about 30 737s a month.

Another challenge will be getting the company's fragile supply chain running again, said Cai von Rumohr, an aviation analyst at financial services firm TD Cowen.

Suppliers that were working ahead of Boeing’s schedule when the strike began may have had to lay workers off or finance operations on their own.

"There are lots of nasty questions in terms of complexities that go into revamping the supply chain,” he said.

One way Boeing could generate cash would be to sell companies that don’t fit directly in the business, such as flight information provider Jeppesen Sanderson, which it bought in 2000 for $1.5 billion, von Rumohr said.

“They’d lose some earnings but they’d get a lot of cash to reduce their debt,” he added. “They really need to get to a more stable position where they have a solid credit rating.”

Ortberg acknowledged the challenges ahead in a message to employees after they voted to end the walkout.

“There is much work ahead to return to the excellence that made Boeing an iconic company," he said.

The labor standoff — the first strike by Boeing machinists since an eight-week walkout in 2008 — was the latest setback in a volatile year for the aerospace giant .

Boeing came under several federal investigations this year after a door plug blew off a 737 Max plane during an Alaska Airlines flight in January. Federal regulators put limits on Boeing airplane production that they said would last until they felt confident about manufacturing safety at the company.