When negotiations with its unions fell apart last week, Twinkie-maker Hostess was forced to shutter its factories and liquidate the company. Could Boeing (NYS: BA) be in similar straits?

It seems like only yesterday that Boeing put an end to its labor disputes with the International Association of Machinists, and the Society of Professional Engineering Employees in Aerospace (SPEEA). In reality, four years have elapsed since those heated negotiations nearly derailed development of the 787 Dreamliner. The contract forged from those fires expired in October, and now, Boeing and its engineers are back at the bargaining table, negotiating a new contract.

Bad news: It's not going well.


Last month, SPEEA issued an angry press release, castigating Boeing for refusing to re-up on the last labor agreement, and offering a contract that:

  • Gave salary raises "at or below the rate of Inflation" -- so, effectively, a pay cut.
  • Required employees to chip in more on their health insurance.
  • Denied pensions to future employees.

Add it all up, and SPEEA leadership called Boeing's offer "unsalvageable." More than 95% of the union's 23,000 members voted to reject Boeing's offer. Since then, Boeing says it has "improved" the terms, but the union's still balking, saying the offer still gives worse pay and benefits than its members were getting under the old contract.

And here's the problem: When SPEEA rejected Boeing's previous offer, the parties entered into a 60-day extension of the original contracts. That extra time runs out Sunday, at which point SPEEA could call for a vote and stage a labor strike. It might decide not to strike -- indeed, SPEEA's scheduled to resume talks with Boeing next week. But the possibility's still out there.

History doesn't always repeat itself
And here's where things get tricky. Last time we found ourselves in this situation, Boeing was having trouble getting its 787 design finalized and ready for sale. A strike, while inconvenient, at least wouldn't have greatly delayed production of a plane that Boeing wasn't yet ready to produce.

Today, though, the 787 is ready for prime time. It's been tested and FAA-approved, it's begun deliveries, and it has a waiting list several years long. A strike today could cost Boeing significant dinero -- not just on 787s, but on the very in-demand 737 as well. Right now, Boeing's building planes of various makes and models at the rate of 52 per month, and bringing in revenue at the rate of perhaps $8 billion per month at list prices. Meanwhile, Boeing has some 4,000 plane orders in its backlog.

So if SPEEA calls a strike, the company will fall nearly two entire planes behind schedule for every day the strike goes on. The company could lose more than a quarter-billion dollars in sales, per day.

Huge stakes for Boeing ...
So Boeing can't allow negotiations to drag on for too long. Problem is, it can't concede too much to the union, either. The company's already offered its engineers pay raises of about 4.25% per year over the next four years. Its technical workers would get roughly a 3.25% annual bump. If you assume an annual inflation rate of 3%, therefore, the union's claim that Boeing is offering raises "below the rate of inflation" no longer holds water. What's more, Boeing says it's also lowered employees' out-of-pocket contributions for health care and eliminated hospital co-pays, among other concessions.

Put it all together, and this is a much better offer than the one Hostess' union was offered. Yet SPEEA's eyeing Boeing's $4.3 billion in trailing profits (and its still more impressive $4.5 billion in free cash flow) and demanding the company share more of the wealth.

... and not just for Boeing
That's a problem for Boeing, which can't reasonably plead poverty in its negotiations, as it did back in 2008, when it was burning cash at the rate of $2.1 billion a year. Today's negotiations could be tougher and drag on longer than they did last time around. This is also, incidentally, a problem for Boeing's suppliers -- companies such as Spirit Aerosystems (NYS: SPR) , Honeywell (NYS: HON) , and General Electric (NYS: GE) -- that need Boeing to keep its production lines humming, to maintain demand for their own components.

Of the three, Spirit appears most vulnerable to a Boeing work stoppage. The company just reported a $211 quarterly operating loss, and last week it lost its leader, when CEO Jeff Turner announced his retirement.

Honeywell, at least, has the nascent recovery in homebuilding to fall back on. Its Automation and Control Solutions business, tied to the housing market, provides more than 40% of Honeywell's business and is actually bigger than Honeywell's vaunted Aerospace division.

Similarly, GE is such a vastly diversified conglomerate that a slowdown at any one customer, even one as big as Boeing, shouldn't hurt it too much. If worse comes to worst, GE can deploy more capital toward its rapidly expanding energy business, where the company recently announced a "partnership" to help Clean Energy Fuels (NAS: CLNE) expand its network of natural gas refueling stations.

If Boeing shareholders are hoping for a quick end to Boeing's labor troubles, they won't be the only ones.

With great opportunity comes great responsibility. For Boeing, which operates as a major player in a multitrillion-dollar market, the opportunity to sell planes to a growing world is absolutely massive. However, the company's execution problems and emerging competitors have investors wondering whether Boeing will live up to its shareholder responsibilities. In this premium research report, two of the Fool's best industrial industry minds have collaborated to provide investors with the key must-know issues around Boeing. They'll be updating the report as key news hits, so make sure to claim a copy today by clicking here now.

The article Will Boeing Go the Way of the Hostess Twinkie? originally appeared on Fool.com.

Fool contributor Rich Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Clean Energy Fuels and General Electric. Motley Fool newsletter services recommend Clean Energy Fuels and Spirit AeroSystems Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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