Boeing strike impact to be felt globally

NEW YORK/PARIS (Reuters) - Aerospace groups braced for global disruption from a potentially lengthy strike at Boeing on Monday as one of the planemaker’s biggest suppliers lost no time in cutting production and working hours.

Three days after 27,000 machinists halted assembly at the world’s top-selling planemaker, Boeing supplier Spirit AeroSystems suspended its 2008 financial guidance and said it was cutting volumes on certain Boeing products.

The former Boeing unit, based in Wichita, Kansas and one of the world’s largest suppliers of airframe structures, said it had managed its way through a similar strike in 2005 by using a shorter working week instead of stopping production.

It said it would implement a revised production and delivery schedule with a reduced working week for employees.

Economists have warned the strike which began on Saturday could hit businesses around the Seattle area, where Boeing’s commercial assembly plants are located, and dent the U.S. economy in particular by expanding its trade deficit.

Early in New York, Boeing stock edged up 0.2 percent to $63.0 but was left on the sidelines of a global market rally triggered by a massive mortgage bailout in the United States.

Shares in EADS, parent of Boeing’s European planemaker rival Airbus, rose more than 5 percent in Paris.

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The fourth strike in 20 years by Boeing’s biggest union threatens to cost the company $100 million a day in revenue and is likely to cause problems for a long list of suppliers across the world in an increasingly global aerospace business.

“My big worry is that historically Boeing strikes tend to be protracted,” said Howard Wheeldon, senior strategist at BGC Brokers LP in London.

“It is serious. This isn’t just a dispute between the workforce and Boeing, but between the workforce and its own union. I am concerned it will get worse before it gets better.”

Any prolonged strike will have a rapid impact on companies which produce parts and engines for existing models such as the popular single-aisle 737 jet or the 777 mini-jumbo, and could eventually push back the already delayed 787 Dreamliner.


Japanese supplier Fuji Heavy Industries, whose main business is making cars under the Subaru brand, said a lengthy strike could have an impact on its aircraft division.

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“We do good business, especially for the 777. Right now we’re waiting for information from Boeing, but if this lasts one, two weeks, it would have some impact,” a spokesman said.

The head of France’s Safran which co-produces 737 engines with General Electric, said however he was not concerned about the strike for the time being.

“Our contractual relations allow us to keep functioning unless the strike lasts for a very long time,” Chief Executive Jean-Paul Herteman told Reuters in western France.

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Boeing itself is cushioned for the time being by a $4.1 billion profit last year and a record $275 billion worth of commercial plane orders. But several analysts say each day of the strike will shave a cent per share off its annual profits.

Standard & Poor’s said its ratings were not immediately affected by the strike but warned a “prolonged labor dispute could hurt Boeing’s financial strength and competitive posture”.

The walkout by the International Association of Machinists and Aerospace Workers (IAM) echoes previous clashes that point to the difficulty of ending such strikes quickly. The union struck for 48 days in 1989, 69 days in 1995 and 28 days in 2005.

The machinists are protesting not only about its contract offer but 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.

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 only 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, along with early production work on Boeing’s new jumbo, 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.

A spokeswoman for key Boeing customer British Airways said the strike “is not affecting any of our deliveries at the moment but we are monitoring the situation”.

Additional reporting by John Bowker, Paolo Biondi, Mark McSherry, Bill Rigby, Matthias Blamont, Laura Myers; Editing by David Holmes/Rory Channing