Could Boeing’s Union Dispute Get Messy?

Leading multinational aerospace and defense contractor The Boeing Company (NYSE:BA) is reportedly seeking federal mediators to help resolve an ongoing renegotiation of contracts for some 23,000 engineers that expired on Sunday. The engineers are represented by the Society of Professional Engineering Employees in Aerospace, or SPEEA, union.

CHEAT SHEET Analysis: Is This Good or Bad News for Boeing?

One of the core components of our CHEAT SHEET investing framework focuses on catalysts that will move a company’s stock. Difficulty in reaching an agreement with unions on new contracts is nothing new, but an employee walkout could seriously cripple Boeing’s output. The fact that Boeing is calling in federal mediators suggests that management does not see a clear path to resolution.

The union reports that it is disappointed with Boeing’s alleged failure to take the negotiations seriously. Union leaders are encouraging members to “continue workplace actions, including refusing to work voluntary overtime and other ‘work-to-rule’ actions to bring pressure on Boeing corporate.”

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Workers are clearly displeased with Boeing’s actions but unless progress is seriously barred in the coming federally-mediated negotiations, there’s no reason to expect a walkout or strike by union members. Boeing maintains that its proposals, which include a cut to the rate of growth for professional and technical employee compensation, are in line with a tough competitive environment.

What are the Major Factors Involved in the Negotiations?

“Discussions during the negotiations today (Nov. 29) included medical benefits, SPEEA salary raise pools and the pension. In the middle of our pension discussion, The Boeing Company stopped negotiation and recommended a federal mediator be brought in,” comments the union…

SPEEA notes that its proposals are aimed at aligning compensation with the value they add to Boeing’s operations. Ostensibly, there is a shortage of high-tech, skilled manufacturing workers in the U.S., giving the union some leverage.

Union members could also be aggravated by reports that top executives at Boeing have had their compensation substantially increased over the past few years. CEO Jim McNerney’s compensation grew 16 percent between 2010 and 2011 to nearly $23 million.

“We are doing everything possible to avoid the need for a work stoppage,” notes SPEEA. However, the union is still preparing for the worst and holding picket captain training sessions.

How Will This Affect Boeing’s Stock?

Shares of Boeing have not materially reacted to the news as of November 30. The time to worry is when negotiations collapse, not when there is a hiccup in the process. Boeing has been one of the best performers in the Dow for November with shares climbing 5.2 percent and seriously out performing Lockheed Martin (NYSE:LMT), which had federally-mediated negotiations with its own union in June.

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