Updated from 10:07 a.m. EDT

Boeing

(BA) - Get Report

was facing what could be a debilitating labor situation as negotiators for its machinists union told the rank and file that they should vote against the airplane maker's latest contract offer.

The company said in a statement on its Web site that it presented the International Association of Machinists and Aerospace Workers union with its "best and final contract offer," including improvements in retirement benefits, bonuses, wage increases and an annual incentive pay program.

"We're proud of this offer and we look forward to sharing the contract details with our employees and having them vote to approve it on Sept. 1," Alan Mulally, the president and CEO of Boeing Commercial Airplanes, said in the statement.

But after reviewing the proposal, the union's negotiators were urging workers to authorize a strike.

"We presented a fair and reasonable offer, but Boeing refused to address your issues," IAM Local 751 said on its Web site. The union said Boeing is offering workers "a divide and conquer strategy you must reject."

The Chicago-based company's three-year plan would cover about 18,000 machinists in Seattle and Portland, Ore. Shares of Boeing were up 2 cents to $66.76 Wednesday.

Boeing said its proposal includes two $3,000 lump sum payments, one payable upon ratification of the contract and one in the second year of the pact. The company also offered a wage increase of 2.5% in the third year of the contract and projected cost-of-living adjustments of 1% a year. On average, machinists would earn about $62,500 a year by the end of the contract, excluding overtime and shift premiums, the company said.

"I just cannot emphasize enough what a strike would mean to us, because we would absolutely be walking away from our commitments to our customers," Mulally told

The Associated Press

.

Should union members vote to strike, Mulally said, the company would have to gradually shut down its operations, according to the

AP

.

The offer also would lift the pension multiplier to $66 a month, from $60, for each year an employee worked, which Boeing called industry-leading. However, the IAM said that suggestion was "insulting" and said Boeing "could easily afford a $20 pension increase."

The IAM is expected to submit the proposed contract to its members for a vote on Sept. 1, just ahead of the 12:01 a.m. contract expiration.

"No one ever wants a strike, but withholding your labor is the only way to stop this attack on American workers," the union statement said.