Boeing is currently in unfavorable circumstances, and so it is implementing quite radical and significant changes in order to cope with the present financial situation. They plan to lay off 17,000 employees or rather 10% of their total workforce. That is a shocking number of people being laid off and still, Boeing believes that it must take this measure due to the ongoing strike by 33,000 workers at the U.S. West Coast. The strike has idle production for some of their prominent aircraft that include the 737 MAX, 767, and 777 jets, among others. With production all over the standstill, Boeing has had to re-evaluate every other thing including the number of people at work.
Kelly Ortberg, the CEO of Boeing, no has been quite frank with regards to the drastic measures that the company has had to take. He pointed out in an internal mail that there was a need for them to be able to “align with our financial reality.” The strike, reputed to be the longest in history, rendered incomprehensible Boeing’s efforts at business as usual. They had to change the order of things and turned to straighten the books first. It means a lot of people being cut off – top managers, department heads, and rank-and-file staff. However, Ortberg’s arguments were not restricted to job cuts; they were also of course signaling a change of tack in the operations of Boeing with an emphasis on its financial performance as opposed to the long-term growth of the company.
Impact on Boeing’s stock price
The consequences of these workforce reductions have been felt in the economy already. Boeing’s stock price declined by 1.1% after hours of trading, which indicates that investors worry about the firm’s prospects of rebounding. This is more difficult for Ortberg, who has just become the CEO, in August. He promised to work on the union and Boeing employees’ relations but with the strike and these layoffs, that mission looks more ambitious.
Boeing has been affected beyond layoffs, on the financial perspective as well. The company has taken a $5 billion pre tax earnings charge for its defense unit and two commercial jet bests. Not to mention, they terminated Ted Colbert, who headed their space and defense division. One can clearly see that Boeing is undergoing some inner restructuring process. They look to be putting measures in place to prevent any further losses, but with numerous factors in play, it is hard to predict when things will get back to order.
The company’s third-quarter earnings report is due on October 23, and it’s expected to show a grim picture. Boeing estimates revenue of $17.8 billion but a loss of $9.97 per share. On the bright side, their negative operating cash flow is expected to be better than anticipated, coming in at $1.3 billion, compared to analysts’ expectations of negative $3.8 billion.
Layoffs and striking workers at Boeing
The layoffs are also putting pressure on striking workers. According to Thomas Hayes, an equity manager at Great Hill Capital, those who are striking without pay are likely feeling the pinch. He predicts the strike could end soon because workers won’t want to risk losing their jobs altogether in the next round of cuts.
Yet, it will not be a walk in the park to settle the strike. For instance, Boeing has approached the National Labor Relations Board and lodged an accusation of unfair labor practices against the machinists’ union for allegedly refusing to compromise. Every month, the strike is draining Boeing’s finances to about one billion dollars, and they may also forfeit their investment-grade credit rating. That is an enormous financial pressure, and one may deduce that time is not on Boeing’s side to fix the situation.
Moreover, the American company announced another year delay to the first deliveries of their 777X jet aircraft. 777x was originally announced to come out some time ago; however, many obstacles have emerged, including development and certification delays and now the strike. Boeing has informed customers who made prior orders of the aircraft that they will not receive their planes until 2026 at the earliest.
Boeing is also facing other issues beyond the strike and redundancy. They’re planning to retire their 767 freighter program in twenty twenty-seven, while production for the KC-46A tanker will remain in place. The Union of machinists and aerospace workers, which has called a strike, has been opposed to the recent moves made by Boeing. They have said that these job losses and the stoppage of the 767 freighter are simply to cover up Boeing’s intransigence in negotiations.
There’s no easy fix for Boeing. With $60 billion in debt and operating cash flow losses of more than $7 billion for the first half of 2024, analysts estimate that Boeing might need to raise between $10 billion and $15 billion just to stay afloat. They’re exploring options to raise money, potentially through selling stock or other equity-like securities, but the road ahead is uncertain. For Boeing, the combination of financial mismanagement, a prolonged strike, and these job cuts might be the breaking point.
