Boeing To Slash 17,000 Jobs Amid Labour Strikes And $5 Billion Charges
The platemaker has been fined for delays in its 777X jetliner program and cost overruns in its defence and space divisions.
(Bloomberg) -- Boeing Co. plans to slash its global workforce by about 10% and announced $5 billion in charges across its commercial airplanes and defence 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 first 777X 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.”
Assuming an average annual salary of $100,000, the job cuts could provide savings of about $1.7 billion in earnings before interest and taxes, Jefferies analyst Sheila Kahyaoglu said in a Friday note to clients. They’re also a possible warning shot for other aerospace manufacturers.
“The workforce reductions are what we have seen across smaller suppliers earlier this week, signaling more to come across” the industry, she said.
The announcements highlight 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. 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 have been on strike for a month now, devastating production and draining Boeing’s reserves.
In response to Boeing’s announcement, the International Association of Machinists and Aerospace Workers pledged to continue its industrial action.
“The path to resolve this strike begins at the bargaining table. An unwillingness to stay at the table only prolongs the strike,” it said in a statement. “CEO Ortberg has an opportunity to do things differently instead of the same old tired labor relations threats.”
The planemaker’s shares fell 1.6% in after-hours trading on Friday. The stock tumbled roughly 42% this year through the close.
A Boeing 777X airplane on the assembly floor at the company's facility in Everett, Washington. (Source: Bloomberg)
Preliminary Results
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.
The preliminary figures imply that Boeing will see a free cash outflow of $1.8 billion during the period ended Sept. 30, Kahyaoglu of Jefferies said Friday. That’s better than the $3 billion cash burn that she had expected, suggesting Boeing’s cash crisis may not be as dire as some had predicted.
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 cited 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 Federal Aviation Administration certification. 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.
Initial 777X freighter deliveries will also slip to 2028, 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 defense and space business will also record a pretax charge of $2 billion, Boeing said. Ortberg in September ousted Ted Colbert as the division’s former chief amid mounting costs from performance stumbles on new development programs as well as 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. The current round of unpaid leave is scheduled to end in late October.
