Unlock Editor’s Digest for free
FT editor-in-chief Roula Khalaf picks her favorite articles from this week’s newsletter.
Boeing plans to lay off about 17,000 workers as its biggest union’s weeks-long strike mounts losses and delays the first delivery of its 777X aircraft.
CEO Kelly Ortberg announced cuts of 10% of the company’s workforce in a message to employees Friday. “Our business is in a difficult position and I cannot overstate the challenges we face together,” he said.
Boeing’s financial problems widened after a door panel on one of its 737 Max jets was damaged earlier this year. Regulators have required manufacturing to be slowed to address quality issues, which has reduced the amount of cash flowing into the company.
Last month, 33,000 workers walked off the job at a Boeing plant in Washington state after the machinists’ union overwhelmingly rejected a new contract. The work stoppage halted production of the company’s 767 and 777 aircraft, further reducing revenue and placing a burden on suppliers and customers.
This week, debt rating agency S&P warned that Boeing’s bonds were likely to be downgraded to junk status. Analysts expect the company to seek to raise at least $10 billion in new capital to strengthen its financial position.
Boeing warned investors in a separate statement after the market closed on Friday that its third-quarter earnings due Oct. 23 would “recognize the impact” related to costs in its commercial and defense segments, as well as the strike.
The company said it had $10.5 billion in cash and marketable securities at the end of September, after burning through $1.3 billion during the quarter. The loss for the period was nearly $10 per share, partially reflecting $5 billion in pre-tax expenses for the quarter, including $3 billion for the 777X and 767 commercial aircraft programs and $2 billion for the defense, space and security business. It will.
Boeing said its revenue for the quarter would reach $17.8 billion, about 3% below analysts’ expectations.
Ortberg, the former CEO of avionics manufacturer Rockwell Collins, was appointed to replace Dave Calhoun in late July. He arrived shortly after Boeing pleaded guilty to misleading U.S. regulators about the flight control system that caused two fatal crashes of the 737 Max in 2018 and 2019.
Boeing continues to be under federal investigation into the 737 Max accident that occurred on an Alaska Airlines flight in January. The accident did not kill any passengers, but it raised new questions about quality control within the company.
The strike occurred after union members rejected the company’s offer of a 30% pay increase. To save cash, Boeing halted purchase orders with suppliers, halted new hiring, and began laying off tens of thousands of employees.
Ortberg said the company will not proceed with the next round of layoffs due to the planned workforce reductions.
John Holden, regional president of the International Association of Machinists and the United Aerospace Workers, accused Boeing of trying to negotiate through the media in its announcement.
“They hope to drive a wedge within our union,” he said. “There is no chance of that happening. “We are stronger than ever and we stand united on every picket line.”
“We need to reset staffing levels to align with financial realities and more focused priorities,” Boeing said, adding that the cuts would include executives, managers and employees. Boeing had 171,000 employees as of the end of 2023.
Ortberg announced that the first delivery of the Boeing 777X jet, which was initially scheduled to enter commercial service in 2020, will be delayed again from 2025 to 2026.
Boeing shares fell about 1.7% in after-hours trading.
