Rohit Baniwal, writer
Brief news
- Boeing will reduce its workforce by 10% (approximately 17,000 employees) due to ongoing losses and a machinist strike affecting production.
- The introduction of the 777X wide-body jetliner is delayed until 2026, with significant financial losses anticipated in Q3.
- CEO Kelly Ortberg faces challenges restoring stability amid labor disputes and operational setbacks, including a $1.3 billion cash discharge.
Detailed news
In response to Boeing’s increasing losses and the fifth week of a machinist strike that has halted its aircraft factories, the company will reduce its workforce by 10%, or approximately 17,000 employees. It will also postpone the long-delayed introduction of its new wide-body jetliner.
The 777X wide-body aircraft, which is still subject to certification, will not be delivered until 2026, which is approximately six years behind schedule. The aircraft’s flight testing were suspended in August after the corporation identified structural damage in one of the aircraft. In a staff memo issued on Friday afternoon, CEO Kelly Ortberg announced that the company will cease production of commercial 767 freighters in 2027 once it has fulfilled all outstanding orders.
“Our business is currently in a precarious situation, and the obstacles we must collectively overcome are difficult to quantify,” Ortberg stated. “In addition to navigating our current environment, the restoration of our company necessitates difficult decisions and the implementation of structural changes to guarantee our ability to remain competitive and provide our customers with long-term service.”
Boeing issued an unexpected press release on Friday, indicating that it anticipates a loss of $9.97 per share in the third quarter. It anticipates that the commercial aviation unit will incur a pretax charge of $3 billion, while the defense division will incur a charge of $2 billion.
Boeing anticipates an operating cash discharge of $1.3 billion for the third quarter in its preliminary financial results.
The job and expense cuts are the most significant actions taken by Ortberg, who is just over two months into his tenure as the company’s CEO. Ortberg is responsible for restoring Boeing to stability following safety and manufacturing crises, which included a near-catastrophic midair door-plug blowout earlier this year.
Ortberg is confronted with yet another obstacle: the machinist strike. Boeing has been burning through capital in what company leaders hoped would be a turnaround year, and credit ratings agencies have warned the company that it is at risk of losing its investment-grade rating.
S&P Global Ratings reported earlier this week that Boeing is incurring a monthly loss of over $1 billion as a result of the strike of over 30,000 machinists, which commenced on September 13 following the machinists’ overwhelming rejection of a tentative agreement that Boeing had reached with the union. Boeing withdrew a newer contract offer earlier this week, as tensions between the manufacturer and the International Association of Machinists and Aerospace Workers have been increasing.
Boeing announced on Thursday that it had submitted an unfair labor practice charge to the National Labor Relations Board. The charge accused the International Association of Machinists and Aerospace Workers of engaging in negotiations in poor faith and misrepresenting the plane manufacturers’ proposals. The union had criticized Boeing for an enhanced offer that it claimed was not negotiated with the union and declared that workers would not vote on it.
Ortberg stated that the job cuts would take place “over the coming months.” This announcement comes shortly after Boeing and its numerous suppliers have been compelled to increase their workforce in response to the Covid-19 pandemic, which has resulted in a significant decline in demand.
Source : CNBC News
