Boeing [BA] on Sunday said its machinist union employees in St. Louis approved a long-term contract extension that results in $80 million in non-cash pension charges in the first quarter but also better positions the company to compete for defense work performed in the region.
Boeing builds the F/A-18E/F, F-15, and EA-18G aircraft along with weapons and support programs in the St. Louis region. The company said in the coming months it will be bidding for work that could extend the life of some of these projects or bring in new projects and that the new contract improves its competitive position for the bids.
Jefferies aerospace and defense analyst Howard Rubel said Monday in a note to clients that the new contract provides Boeing “a predictable and reasonable wage scale for the company to bid for incremental work.” In addition to the F/A-18 and F-15 work, Rubel said other bids that will benefit include the T-X trainer, the UCLASS unmanned aircraft system, and the Air Force’s next-generation bomber.
Commenting on the contract vote, Bill Schnettgoecke, Boeing’s St. Louis site executive, said in a statement that “Not only does it better position us to compete, but it also ensures that our highly-skilled IAM-represented employees, those with us today and in the future, are appropriately compensated for their important work.”
The new contract with more than 2,300 workers was set to expire in January 2015 but now runs out in July 2022.
Under the contract extension, Boeing will pay eligible employees an $8,000 signing bonus within 30 days and provide a general wage increase every other year beginning in 2016 and lump-sum payments in 2017, 2019 and 2021.
The $80 million in non-cash pension curtailment charges are in addition to the $140 million non-cash charge that will also be recorded in the first quarter stemming from a new labor contract in January with machinist union employees that are primarily located in Washington. Boeing said that its core earnings expectation for 2014, which exclude non-operating impacts such as the charges related to the new machinist contract, will not be materially affected by the contract.