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Boeing will cut about 17,000 jobs and delay the first deliveries of 777X jets as the planemaker faces deepening losses and the impact of a weeks-long strike by largest labor union.
CEO Kelly Ortberg announced the cuts, equivalent to 10% of its workforce, in a message to employees on Friday. “Our business is in a difficult position and it is difficult to exaggerate the challenges we face together,” he said.
Financial troubles have escalated now Boeing since the beginning of the year, when a door panel blew off one of the airline’s 737 Max jets on a passenger flight. Regulators ordered a slowdown in production to fix quality problems, reducing the amount of money flowing into the company.
Last month, 33,000 workers walked out of Boeing factories in Washington state after members of the machinists’ union rejected a new contract. The shutdown halted production of the company’s 767 and 777 aircraft, further cutting into revenue, causing putting stress on its suppliers and customers.
Debt rating agency S&P this week warned of the possibility of downgrading Boeing’s bonds to junk status. Analysts expect the company will seek to raise at least $10 billion in new equity to strengthen its financial position.
In a separate statement after markets closed on Friday, Boeing warned investors that third-quarter results scheduled for October 23 will “see impacts” related to beat as well as charges in its commercial and defense divisions.
The company said it had $10.5 billion in cash and marketable securities at the end of September after burning through $1.3 billion in cash during the quarter. The loss for the period came to nearly $10 per share, partly reflecting a pre-tax charge of $5 billion in the quarter, including $3 billion for the 777X and 767 commercial aircraft programs and $2 billion for operations. defense, space and security business.
Boeing said revenue for the quarter would come in at $17.8 billion, a figure about 3% below analysts’ expectations.
Ortberg, former CEO of avionics manufacturer Rockwell Collins, was Appointed at the end of July to replace Dave Calhoun. He arrived shortly after Boeing pleaded guilty to misleading US regulators about the flight control system that caused two fatal crashes of the 737 Max in 2018 and 2019.
Boeing continues to face federal investigations into the 737 Max crash on an Alaska Airlines flight in January, which killed no passengers but led to new questions about quality control in internal company.
The machinists’ strike took place after union members rejected the company’s offer of a 30% wage increase. In an effort to conserve cash, Boeing has begun suspending orders with suppliers, suspending new hiring and furloughing tens of thousands of employees.
Ortberg said that, due to the planned job cuts, the company will not institute the next round of furloughs.
Boeing needs to “reset our workforce levels to align with our financial realities and with a more focused set of priorities,” he said, adding that the cuts would includes executives, managers and employees. Boeing has 171,000 employees at the end of 2023.
Jon Holden, district president of the International Association of Machinists and Aerospace Workers, accused Boeing of trying to negotiate through the press with its announcement.
“They hope to cause division in our union,” Holden said. “There is no such chance. We are stronger than ever and united on every route.”
Ortberg announced that Boeing’s first deliveries of 777X jets – scheduled to enter commercial use in 2020 – will be delayed again, from 2025 to 2026.
Boeing shares fell about 0.9% in after-hours trading.
