Boeing supplier cuts production

The union says its members have gone without a pay rise for four years

Companies operating in the aerospace industry are bracing themselves for disruption as one of Boeing's largest outside suppliers has cut production.

Spirit AeroSystems will reduce working hours to deal with a strike by 27,000 Boeing machinists. It used a shorter week during a Boeing strike in 2005.

Members of the Machinists Union downed tools on Sunday after last-minute pay negotiations failed.

It is estimated the action will cost Boeing $100m (�57m) a day in revenue.

Tactics

Spirit AeroSystems already used the scaling down tactic in 2005 when there was a similar walk-out by Boeing workers.

According to the company, this measure allows for the company to offer a revised working week instead of stopping production completely.

But analysts are already forecasting that the strike could have a significant negative impact on businesses in the local Seattle area - the location of several Boeing plants - and Boeing customers.

My big worry is that historically Boeing strikes tend to be protracted Howard Wheeldon, senior strategist BGC Brokers

On a wider scale, concerns have been raised about the effect on the already-slowing US economy and the possibility that the strike action could expand the country's trade deficit.

While the effects on the company can be somewhat ameliorated for the near term due to its $4.1bn profit of last year, analysts believe each strike day shaves one cent per share off its annual profits.

History

Boeing says it has offered more than $34,000 (�19,200) per employee in pay and benefits, but workers say that considering Boeing's profits, this is not enough.

Workers are also disgruntled by the prospect of the company moving more jobs to foreign firms and to non-union workers.

This is not the first time the US manufacturer has been hit by strike action. It is in fact the fourth strike by its biggest union in 20 years.

The International Association of Machinists and Aerospace Workers (IAM)'s first walkout was staged in 1989 and lasted 48 days.

A second occurred in 1995 for 69 days and another for 28 days three years ago.

Taking the previous strike action times into account, several analysts are worried that the current strike action could be prolonged.

"My big worry is that historically Boeing strikes tend to be protracted," said Howard Wheeldon, senior strategist at BGC Brokers.

"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," he added.

Dreamliner delays

Analysts say the stoppage will cause further delays in the delivery of the new Dreamliner aircraft.

The Machinists Union is Boeing's biggest labour group, and the company has said it will not try to assemble aircraft during the strike.

Boeing hopes that its latest lightweight passenger jet - which is already two years late - will help it compete with rival manufacturer, Airbus.

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