Boeing has announced that it will be cutting 10% of its workforce, amounting to about 17,000 employees, as it faces mounting losses and a strike by machinists that has halted its aircraft factories for five weeks. Additionally, the launch of its new wide-body airplane, the 777X, will be delayed until 2026, six years behind schedule. The company will also cease production of commercial 767 freighters in 2027 after fulfilling outstanding orders, CEO Kelly Ortberg stated in a memo to staff. Boeing anticipates reporting a loss of $9.97 per share in the third quarter and expects to incur a pretax charge of $3 billion for its commercial airplane unit and $2 billion for its defense business.
With preliminary financial data suggesting an operating cash outflow of $1.3 billion in the third quarter, Ortberg acknowledged the severe challenges facing the company. He noted the need for tough decisions and structural changes to ensure long-term competitiveness and customer satisfaction in a difficult business environment. The job and cost reductions represent the most significant actions taken by Ortberg since assuming the role just over two months ago. Tasked with steering Boeing through safety and manufacturing crises, the ongoing machinist strike poses a major obstacle, with credit ratings agencies cautioning that the company could lose its investment-grade rating.
Following a failed tentative agreement between Boeing and the International Association of Machinists and Aerospace Workers that led to the strike beginning on September 13, tensions have escalated between the two parties. Boeing has accused the union of negotiating in bad faith and misrepresenting the company’s proposals, prompting a charge of unfair labor practices with the National Labor Relations Board. The union, in turn, has criticized Boeing for a unilateral offer that was not negotiated with workers and subsequently withdrawn by the company. These developments have further complicated the already strained relationship between Boeing and its employees, adding to the challenges faced by the aerospace giant.
Boeing’s financial struggles have been exacerbated by the strike, with reports indicating that the company is losing over $1 billion per month due to the ongoing labor dispute. Despite efforts to recover from the setbacks of the past year, including cash burn and credit rating concerns, Boeing continues to face significant hurdles. The job cuts, set to occur in the coming months, come at a time when Boeing and its suppliers have expended considerable resources to ramp up operations in response to demand fluctuations brought about by the pandemic. The impact of these reductions on the workforce and broader industry dynamics remains to be seen as Boeing navigates through a period of uncertainty and change.
In his address to staff, Ortberg emphasized the need for accountability and resilience in overcoming the company’s current predicament, underscoring the importance of making tough decisions to ensure long-term viability. With Boeing’s strategic decisions becoming increasingly pivotal in the face of economic and operational challenges, the aerospace giant finds itself at a critical juncture. The measures announced by Ortberg signal a significant shift in the company’s approach to addressing its financial woes and labor relations, with structural changes likely to shape Boeing’s future trajectory. As the company grapples with the fallout from the pandemic, labor disputes, and market uncertainties, the road ahead remains fraught with obstacles that will test its leadership, workforce, and stakeholders in the months and years to come.
