Boeing and its largest workers' union are making slow progress in the last leg of key contract negotiations, with no sign of a breakthrough as the end of the current contract draws near.

The plane maker is intent on cutting pension and health-care costs, but its machinists -- who put together Boeing planes in Seattle -- are determined to get a larger share of the company's record profits.

Industry-watchers say a strike is likely after the current contract expires at midnight on September 3, given the fractious history of Boeing and its workers.

The probability of a walkout -- which could cost the company USD$3 billion a month in revenue -- is "pretty good," said aerospace analyst Richard Aboulafia at the Teal Group.

"It's Boeing's responsibility to look after the long-term bottom line and it's the union's desire to take advantage of short-term prosperity. These are not reconcilable interests."

The International Association of Machinists and Aerospace Workers (IAM) -- which represents 27,000 Boeing workers, mostly in the Seattle area, but also in Portland, Oregon and Wichita, Kansas -- has gone on strike three times in the last 20 years.

Boeing negotiators, led by human resources chief Doug Kight, and the IAM, led by Seattle-area president Tom Wroblewski, checked into the DoubleTree hotel near Seattle-Tacoma airport on Thursday for 10 days of round-the-clock talks to get the contract settled. The first phase of talks started on May 9.

So far, little progress has been reported by either side. The union's main sticking points are Boeing's proposals to stop offering retirement medical cover for future hires, and putting new workers into a defined retirement benefit plan rather than the traditional Boeing pension fund. The company also wants to split off the 750 or so workers in Wichita onto a different contract.

"These are strike issues," the IAM said in the latest update on its negotiations. "Our members are fired up and the company has to address the issues or there won't be any planes being built after September 3rd," the IAM said.

Boeing was less dramatic. "We listened to the union's ideas and are carefully considering the issues they raised," said a memo from Kight, after the first day of talks on Thursday.

A strike wouldn't destroy Boeing, but it would come at an uncomfortable time as the plane maker struggles to get its 787 Dreamliner into the air.

The fuel-efficient 787, which is key to Boeing's financial future, is already running about 15 months behind schedule. It is now set to have its first test flight in the fourth quarter, but a strike would likely delay that.

Boeing has been broadcasting ads on local Seattle radio, urging IAM members to pay attention to the contract talks and reminding them that Boeing will "only succeed by working together."

For its part, the union has been keeping the pressure on management with lunchtime rallies on plane production lines.

Under the slogan "It's our time this time," the IAM is looking for concessions from Boeing as the company crests a peak of earnings and orders.

Boeing made a record USD$4.1 billion net profit in 2007, benefiting from a surge in plane orders and rising US military spending. It now has a record USD$346 billion worth of civil and defense work in its order books.

Boeing set an industry record with 1,413 net plane orders last year, but as the recent surge in oil prices hurts customer airlines and a global economic downturn looms, Boeing has its eyes on containing costs.

"Boeing is not going to want to impair its long-term competitiveness," said Aboulafia. "The union is in the last strong manufacturing sector in America, and they want to take advantage of that."

Boeing is expected to propose its best and final offer around Labor Day, September 1, with IAM members set to vote on the contract on September 3. IAM's current 36 month agreement expires at midnight on September 3, meaning the first day of a strike -- if approved by members -- would likely be Thursday September 4.

The IAM has gone on strike three times in the last 20 years. Its members walked off the job for 48 days in 1989, for 69 days in 1995 and 28 days in 2005. The union rejected Boeing's final offer in 2002, but less than the necessary two-thirds voted for a strike, which meant the contract was accepted by default.

A strike could cost Boeing USD$3 billion a month in revenue, as it would not get paid if planes are not delivered. Last quarter, Boeing's commercial planes unit took in USD$8.6 billion in revenue, or about USD$2.9 billion per month.