Boeing Co. wins cost controls by finalizing its largest union deal

The Boeing Co.s efforts to aggressively control costs and avoid disruption for one of its most important new jetliners were crowned with success after finalizing the deal of the company with its largest union, as reported by the Wall Street Journal.

The ratification vote on the eight-year deal late on Friday ended 51% to 49% and revealed a deep divide among the machinists union. The divide is believed to be over a contract including some deep concessions on health-care costs and retirement benefits. A contract offer requiring major union concessions on the wage structure was rejected 2-to-1 by union members in November 2013. This wage requirement was dropped by Boeing in the offer approved on January the 3rd 2014.

The contract is expected to take effect in 2016. Its approval is believed to be quite promising, because Boeing engaged itself to assemble its planned 777X jetliner and its carbon-fibre composite wings in Washington-based unionized facilities. The deal finalizes the nationwide search of the company for a proper 777Xs home, and the deliveries of the jetliner are expected to start in 2020. The search for alternate locations had begun after Boeings first contract offer was rejected in November last year, and 54 sites were offered to Boeing by 22 states.

Boeing Co. plans to use a different strategy for its 777X units. The company will still rely on the global supply chain that builds its 777 model, but it also plans to manufacture and design a great part of the jets unit itself.

An approval was not specifically called for by the international unions leaders on Friday. However, the latest offer was once again opposed by the local district of the International Association of Machinists and Aerospace Workers. The district of the Association is known to represent more than 32,000 employees at Boeings commercial unit. Jim Bearden, who is the administrative assistant of the Machinist unions district president Tom Wroblewski, said on the occasion: “Our members have spoken… this is the course we will take.”

According to CNN Money, the current share price of Boeing Co. is 0.70% up, and its one-year return rate is 0.83% up. The 21 analysts offering 12-month price forecasts for Boeing Co. have a median target of 150.00, with a high estimate of 175.00 and a low estimate of 134.00. The median estimate represents a 9.00% increase from the last price of 137.62.