As losses continue to rise and an extended machinist strike grinds production to a halt, Boeing has announced a plan to cut 10 percent of its workforce or roughly 17,000 jobs.
This decision comes as the aerospace giant contends with significant financial challenges and delays to its aircraft programs, including the highly anticipated 777X wide-body plane.
Job Cuts and Production Delays
The 17,000 job cuts represent one of the most substantial workforce reductions Boeing has made in recent years.
CEO Kelly Ortberg, who assumed his role just over two months ago, outlined the layoffs in a staff memo on Friday, acknowledging the challenging position the company finds itself in.
Ortberg emphasized that these difficult decisions are necessary to maintain Boeing’s competitiveness and long-term viability.
Boeing will also delay the delivery of its 777X wide-body plane until 2026, making it nearly six years behind schedule.
The aircraft, which has been in development for years, faces ongoing certification issues, with recent structural damage discovered during flight tests.
Furthermore, Boeing announced it will halt production of its 767 freighters by 2027, following the completion of its current orders.
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,”
Ortberg said: “Beyond navigating our current environment, 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.”
Financial Strain and Market Repercussions
The workforce reduction is part of a broader effort to mitigate Boeing’s financial losses, which have been mounting due to a combination of delayed aircraft launches and the machinist strike.
In a surprise earnings release on Friday, Boeing reported that it expects a third-quarter loss of $9.97 per share, with a $3 billion pretax charge in its commercial airplane division and a $2 billion charge in its defense business.
Boeing also disclosed a preliminary cash outflow of $1.3 billion for the third quarter.
The machinist strike, which has halted production across Boeing’s facilities since September 13, has exacerbated the company’s financial woes.
According to S&P Global Ratings, Boeing is losing more than $1 billion per month due to the work stoppage, and there are concerns that the company could lose its investment-grade credit rating.
The strike involves over 30,000 members of the International Association of Machinists and Aerospace Workers, who rejected a tentative contract agreement last month, sparking increased tension between the company and the union.
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Rising Tensions and Stalled Negotiations
The relationship between Boeing and the machinist union has grown increasingly strained as the strike drags on.
Earlier this week, Boeing filed an unfair labor practice charge against the International Association of Machinists, accusing the union of negotiating in bad faith and misrepresenting Boeing’s offers.
The union responded by criticizing Boeing for withdrawing a revised contract offer and for not engaging in collaborative negotiations.
Jon Holden, president of IAM District 751, representing the striking workers, urged Boeing to return to the negotiating table and pursue a resolution that meets the needs of the machinists.
“CEO Ortberg has an opportunity to do things differently instead of the same old tired labor relations threats used to intimidate and crush anyone that stands up to them,” Holden stated.
He emphasized that any contract agreement would ultimately need the approval of the union’s membership.
While Boeing has expressed skepticism about the potential for productive negotiations, union leaders continue to push for a renewed bargaining effort.
As of now, Boeing has indicated that further discussions are unlikely to take place until both parties demonstrate a willingness to compromise.
Broader Implications for Boeing’s Future
The job cuts come as Boeing and its suppliers attempt to recover from the downturn in air travel demand caused by the COVID-19 pandemic.
The company had been scaling up its workforce to meet rising post-pandemic demand, but its current financial situation has necessitated reevaluating these efforts.
The layoffs are likely to affect Boeing employees and a vast network of suppliers and partners who depend on Boeing’s production schedules.
The decision to delay the 777X wide-body plane and cease 767 freighter production underscores Boeing’s financial and operational challenges in its commercial airplane segment.
With demand for new aircraft still rebounding from pandemic lows, the delays and production cuts could impact Boeing’s market position, particularly as competitors like Airbus ramp up their production efforts.
Looking Forward: Boeing’s Path to Recovery
The next few months will be critical for Boeing as it navigates the financial fallout of its restructuring and seeks to resolve with the machinists’ union.
CEO Ortberg’s focus will be on stabilizing Boeing’s operations, securing certification for the 777X, and rebuilding trust with stakeholders.
As Boeing strives to regain its footing in the competitive aerospace market, its ability to address both financial and labor challenges will be crucial in shaping its path forward.
