Talks between the Boeing Company and its largest union ended in failure, setting the stage for a walkout at midnight.
The strike is set to halt aircraft production, and could possibly delay the 787 Dreamliner even further.
A statement on the website of the International Association of Machinists and Aerospace Workers (IAMAW) said that despite the meeting that progressed late into the night, and throughout the day, ''continued contract talks with the Boeing company did not address our issues.'' Two days back, workers had rejected Boeing's contract with leaders agreeing to delay the strike until tonight to facilitate discussion between the two sides with the help of a federal mediator.
The strike comes at a very bad time for Boeing, who is seeing an unprecedented order book from airlines who want newer, more fuel efficient planes in the wake of oil prices having cross $140 in past months. Sources say it could well keep the 787 Dreamliner from getting off the ground on schedule.
Analysts estimate that if the strike lasts around a month, losses could be to the tune of $2.8 billion in terms of lost revenues, and Boeing's earnings would be eroded by as much as 31 cents a share. Some industry sources also say that Boeing's offer was ''reasonable'' given the prevailing economic conditions and the projected market slowdown, and that the union's gamble is ''significant and immediate.''
The IAMAW represents around 27,000 employees in Washington state, Oregon and Kansas. These workers make parts and assemble planes for the Chicago-based aviation company, which is second only to European aviation company Airbus SAS in the commercial aeroplane market.
Boeing has its manufacturing hub in Seattle. It now plans to deliver planes completed prior to the strike, and will not assemble any during the walkout.
Boeing spokesman Tim Healy said that the company ''worked hard'' with the union and the mediator, pursuing different options that in the end we were ''too far apart'' to end in an agreement.
He said that though the company was open to further discussion, no talks have been scheduled.
The last strike by the machinists lasted 28 days in 2005, and cost Boeing $300 million in terms of the company's second-half earnings.
The bone of contention
Boeing had ended talks with the union on 28 August after proposing its final offer that included an 11 per cent pay hike and higher pension payments. It did not agree to the union's demands to limit the use of external contractors for work traditionally done by machinists, while demanding workers pay higher medical co-pays and deductibles.
The union, on the other hand, was optimistic of securing at least a 13 per cent hike in wages, pension payments even higher than what Boeing had proposed with no changes to their health care plans, and to secure some of the machinist work that was being farmed out.
Boeing's offer was rejected by an eighty per cent majority in the 3 September vote, with 87 per cent ballots in favour of a strike.
The union says that an average machinist is around 46 years old, and makes around $26 an hour, translating to annualised earnings of around $54,000. Around 2,300 machinists are below 30, and over 4,000 union members make under $30,000.
Delayed Dreams, lined up
Boeing had intended to get the 787 Dreamliner airborne this November, and commence deliveries by the third quarter of 2009, 14 months behind its original schedule.
Analysts say that a strike lasting over a month would ensure that the aircraft would not be certified by the US Federal Aviation Administration (FAA) next year, which would compound its delays.
Boeing has sold 895 Dreamliners till date, estimated to be worth around $155 billion. In an era of sky-high oil prices, Boeing said the plane's light weight would save fuel and lower operating costs for airlines.
Toulouse, France-based Airbus took the converse logic when it went after making the Airbus A380, putting 525 passengers on a larger aircraft to give airlines ''economies per seat''. Airbus has also built more jets than Boeing each year since 2003.