The machinist union of Boeing (NYSE:BA) has given the green light for a seven-and-a-half-year contract extension at its St. Louis plant that will see the company’s employees — those belonging to the union, at least — move away from a defined benefit retirement plan, Reuters is reporting.
The contract applies to 2,300 Boeing employees who are represented by the International Association of Machinists and Aerospace Workers and is now in effect through 2022. In its statement, Boeing explained that its employees will be moved from a 401(k)-style retirement benefit system on January 1, 2016, and provide wage bumps for 2016, 2018, 2020, and 2022, as well as lump-sum payments in 2017, 2019, and 2021, Reuters said. The workers will also get an $8,000 signing bonus, according to the company.
The retirement plan may result in some non-cash pension curtailment charges amounting to roughly $80 million on the first-quarter GAAP earnings, Boeing warned. The facility in St. Louis builds Boeing’s military aircraft, including the F/A-18E/F and F-15 fighter jets, the EA-18G electronic attack aircraft, and weaponry and support systems.
“In coming months, Boeing will bid for work that could extend some of those or bring in new projects. The contract extension improves its competitive position for those bids,” Boeing said in a press statement.
The news comes on the heels of a concerning report for Boeing investors, as the Navy has been unable to make room in its budget for a new order of F/A-18 Super Hornet jets. Historically, the plane has been instrumental in keeping Boeing’s production line for the plane open. The company is now appealing to Congress to maintain the volume needed to continue producing the plane.
Additionally, Boeing has been ironing out some of the hiccups associated with its perpetually challenged 787 commercial jet. After waves of technical problems, Boeing is seeing some pressure on its ability to maintain its build rate of the plane, which has been sitting at around 10 units per month.