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Boeing CEO says talks with union at "standstill"

By Scott Malone
/ Source: Reuters

By Scott Malone

Three weeks into a strike against Boeing Co , talks between the U.S. aircraft maker and its largest union are "at a standstill," the company's chief executive said on Wednesday.

The head of one of the world's two top aircraft makers also said it is vitally important for the U.S. government to restore confidence in the capital markets, which have been rattled by a financial crisis that has claimed some of the most storied names on Wall Street.

Boeing is in the third week of a production halt at its Seattle-area factories brought on by a strike of the 27,000 workers represented by the International Association of Machinists and Aerospace Workers.

"We're at a standstill now. We're unable to find the common ground we need to have the discussion we need to have to solve the problem," said Jim McNerney, who heads the plane maker.

The IAM-represented workers walked off the job on September 6 after Boeing came close to meeting the workers' pay demands, but stuck to its plans to outsource the production of many key components of its aircraft.

Each month of the strike could drag Boeing's earnings down by 25 cents per share, Goldman Sachs analyst Richard Safran wrote in a note to clients. Wall Street is looking for third-quarter profit of $1.25 per share, according to Reuters Estimates.


McNerney said Washington needs to act on some plan to restore confidence to the markets.

"It's important that something get agreed to restore confidence in our financial markets," McNerney said. "We got to a point a few days ago where people weren't lending to one another...Something had to be done."

Boeing has about $7.9 billion in total outstanding debt that carries an "A-plus" rating, the fifth highest investment grade, from Fitch and Standard & Poor's.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have called on Congress to quickly approve a proposed $700 banking bailout. Lawmakers have criticized the enormous scope and lack of specific details in the proposal.

"The folks in Washington, led by Hank Paulson, are taking steps that many of us, if we were just chatting in a cocktail party without the situation in front of us would disagree with," McNerney said. "But given where we are, I think this kind of intervention is necessary."

One of Boeing's largest customers is International Lease Finance Corp, owned by American International Group Inc . AIG needs to raise money after receiving an emergency $85 billion U.S. government loan.

McNerney said he remains confident the aircraft lessor will remain a "strong customer" regardless of its fate.

"ILFC was a great company when it was independent. It grew and stayed a great business when it was part of AIG and I have confidence, whatever form it ends up in, it will remain a strong customer," McNerney told reporters after addressing the Boston College Chief Executives Club.

The credit crunch has prompted more Boeing customers to ask it for help in financing purchases, though few have actually taken loans from the company, he added.

"We tend to be a lender of last resort," he said. "We've seen somewhat greater requests, but actually taking us up on it, is not a big upturn yet."

Analysts have warned that 25 percent of the sales backlog at Boeing and European rival Airbus, a unit of EADS , could be imperiled as a result of the economic slowdown.

But McNerney said history suggests the effects would not be that severe.

"We've examined past economic downturns like we're experiencing now and it tends to be that the risk is in the 5 to 10 percent range," McNerney said. "Could be a little worse, could be better than that. We'll have to monitor the situation."