Kelly Ortberg’s earnings came out as follows Boeing CEO of Co. felt nervous as workers voted the same day whether to accept the aircraft manufacturer’s latest proposal and end a five-week strike.
Boeing and the union representing 33,000 striking members have reached a tentative new agreement to raise wages 35% over four years, an unprecedented pay increase.
But hourly workers have the final say with their Oct. 23 vote, and it’s far from certain approval. They overwhelmingly rejected a September deal backed by labor leaders. This time, union negotiators did not endorse the proposal.
The results of the vote, which requires a majority to pass, will not be known until later in the day in Seattle, Boeing’s main manufacturing hub. That means investors, employees and executives will be left hanging for hours after the earnings report, uncertain whether Boeing can finally start on the road to recovery — or be forced to continues to struggle with weak production and increasingly depleted cash reserves.
The strike has become a decisive period for Ortberg, who inherited a series of interlocking crises when he took over in early August. He announced a 10% cut to the workforce and will apply to all levels of the plane maker, and he laid out the first outlines of a $25 billion recapitalization package aimed at stabilizing the company over the next three years.
“If it is perceived that his first few months have been without a trace of success, this would be a great step to turn things around,” said Richard Aboulafia, aerospace analyst at Aerodynamic Advisory LLC. position”. “It will reduce the risk of an extremely dangerous situation.”
Manufacturers face the risk of their credit ratings being cut to low levels if the shutdown drags on, a move that could increase borrowing costs and hinder their access to capital. . The squeeze extends to Boeing’s fragile supply chain, where any layoffs could hurt efforts to ramp back up factories once the conflict ends.
Ortberg’s efforts to reset Boeing’s culture and relationship with employees were damaged by the strike. The job cuts announcement, along with a raft of other measures, threatens to fray the already fragile relationship between senior management and the shop floor.
Boeing’s crisis of confidence extends beyond investors, pushing the stock price down 41% this year. The company has faced whistleblower accounts recounting years of unauthorized work and defects accusing management of prioritizing production targets and financial goals over diligence and good workmanship. .
Floor crisis
The new CEO, who retired after a series of crises since the beginning of the year that led to the departure of his predecessor, sought to appeal to a spirit of solidarity and common destiny. He also made a point of being closer to the action, buying a house in the Seattle area and spending more time on the factory floor.
Ortberg has made clear that he is contemplating structural changes, telling employees that resources are spread too thin. The manufacturer could earn up to $20 billion from selling a series of assets not needed for its main commercial and defense businesses, such as navigation subsidiary Jeppesen, analyst Cai von Rumohr said. by TD Cowen wrote in an October 1 report.
The strike has exposed rifts inside a company where senior executives have long focused on profits, while machinists have seen their wages eaten away by inflation. their pension plans evaporated under a controversial 2014 contract. As a result, many employees vowed to try to get a significantly better deal.
That’s why it’s unlikely that the latest proposal, achieved with an encouraging push from the White House, will succeed. Leaders of the International Association of Machinists and Aerospace Workers District 751 did not make a recommendation on how members should vote on the tentative agreement, which does not restore pensions.
Boeing will release earnings before markets open in the US on October 23. The company revealed several key figures when it announced its job cuts plan on October 11, including The quarter was below analysts’ estimates and a $5 billion charge related to various programs. .
Take your time
Boeing also said it withdrew $1.3 billion in cash during the period, adding to losses of more than $7 billion in the previous two quarters.
With the key results in place, Ortberg will have more time to implement his plans for Boeing. By some estimates, the recovery effort will ease as major commercial factories restart around Seattle, ending strikes that cost about $100 million a day in lost revenue.
However, restarting the assembly line will be a gradual process, due to the complexity of coordinating hundreds of thousands of parts while glitches persist throughout the aerospace supply chain. and national defense.
Douglas Harned, an analyst at Bernstein, said that even a strike resolution by the end of October would mean deliveries of newly manufactured aircraft would essentially be shut down until November. If, he said, Past strikes are such that by any measure recovery will take time.
“Boeing is not going away,” Harned wrote in an Oct. 17 report. “However, it is unclear what the company will look like in five years.”
