Boeing to cut workforce by 10% as strike eats into reserves
The cuts amount to about 17,000 positions, including executives, managers, and employees
New York: Boeing Co. plans to slash its global workforce by about 10% and announced $5 billion in charges across its commercial airplanes and defense businesses, underscoring the depths of the planemaker's financial woes amid a crippling labor strike.
The cuts translate to roughly 17,000 positions and will include executives, managers and employees, Chief Executive Officer Kelly Ortberg told employees in a memo on Friday. The company also plans to delay the introduction of its next 777 jetliner, and separately announced that it expects third-quarter sales to come in well below Wall Street estimates.
"Our business is in a difficult position, and it is hard to overstate the challenges we face together," Ortberg said in the memo. "Restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term."
Attempting to break a stalemate with workers
The announcements underscore the massive undertaking that Ortberg faces as he tries to turn around the troubled aerospace and defence manufacturer. Boeing unveiled the latest cost-cutting measures and preliminary financial results as it seeks to break a stalemate with the International Association of Machinists and Aerospace Workers. The latest talks collapsed earlier this week, with no clear path as to when and how they might resume.
Boeing has made two offers for higher wages, both of which have been rebuffed by the union representing hourly factory workers across the west coast. About 33,000 employees at its main Seattle-area facilities have been on strike for a month now, devastating production and draining Boeing's reserves.
Shares and revenue fall
Boeing shares fell 1.8% as of 5:39pm after regular trading Friday in New York. The stock tumbled 42% this year through the close.
The company expects third-quarter revenue of $17.8 billion, less than the $18.6 billion expected by Wall Street, according to the average of analyst estimates compiled by Bloomberg. The company also sees a $9.97 net loss per share under generally accepted accounting principles, according to preliminary figures released Friday. Operating cash outflow should be $1.3 billion, leaving Boeing with cash and investments in marketable securities of $10.5 billion at the end of the period, it said. The company is due to announce its full results on Oct. 23.
Boeing expects the results to include about $5 billion in combined pretax charges at its two main business divisions. About $2.6 billion of that stems from yet another delay of Boeing's 777X wide-body jet. Ortberg said the company has notified customers that the first deliveries of the plane won't begin until 2026. He citing the ongoing work stoppage and flight test pause.
It's the latest setback for the jetliner, which was already five years behind schedule in getting certified by the Federal Aviation Administration. In August, Boeing announced it was suspending tests due to cracking in a key component known as a thrust link that helps attach the plane's hulking GE Aerospace engines to the wings.
The delay of the initial passenger version and a freighter model - now scheduled for 2028 - will result in a pretax accounting charge of $2.6 billion, Boeing said. Overall, the commercial aircraft business will record charges of $3 billion as it closes down production of the 767 program in 2027, after the remaining aircraft on order are built.
The defence and space business will also record a pretax charge of $2 billion, Boeing said. Ortberg in September ousted Ted Colbert, the division's former chief, as costs mount for performance stumbles on new development programs as well a revamped version of the F-15 fighter jet.
Boeing has already initiated a range of cost-cutting plans as it grapples with dwindling reserves and low output. The company has put some workers on furlough, frozen hiring and cut back on corporate travel. Ortberg said the company would not proceed with the next cycle of furloughs as part of its plan to cut jobs.