Boeing to Cut 17,000 Jobs Amid Prolonged Strike and Financial Struggles
Boeing is set to cut 17,000 jobs, around 10% of its global workforce, delay the first deliveries of its 777X jet by a year, and record $5 billion in losses for the third quarter. This comes as the company grapples with a month-long strike that has halted production and led to significant financial strain. Boeing’s CEO, Kelly Ortberg, stated that these downsizing measures are essential to align with the company’s “financial reality.”
Strike Halts Production and Forces Major Changes
The strike by 33,000 workers on the US West Coast has caused Boeing to suspend production of its 737 MAX, 767, and 777 jets. Ortberg, who took over in August, acknowledged the need for a workforce reduction across all levels, including executives, managers, and employees. Boeing shares dropped 1.1% in after-market trading following the announcement.
Boeing has reported a pre-tax earnings loss of $5 billion, primarily from its defence sector and two commercial plane programs. The company now anticipates third-quarter revenue of $17.8 billion, with a loss per share of $9.97. Despite the challenges, the expected negative operating cash flow of $1.3 billion is better than the $3.8 billion burn rate analysts had predicted.
Impact of the Strike and Job Cuts at Boeing
Industry analysts suggest that the layoffs may push workers to end the strike. Thomas Hayes, an equity manager at Great Hill Capital, noted that striking workers may fear losing their jobs permanently. Boeing’s legal battle with the machinists’ union, accusing it of not negotiating in good faith, has further strained relations. The strike has reportedly cost Boeing $1 billion per month, with the company at risk of losing its investment-grade credit rating.
In addition to the workforce reduction, Boeing announced that the delivery of its 777X aircraft, already delayed due to certification issues, will now be pushed to 2026. The company will also end its 767 freighter program by 2027, though production for the KC-46A Tanker will continue.
Financial Struggles and Future Challenges
The strike and financial losses compound Boeing’s existing problems. Earlier in 2024, the company experienced a mid-air panel blowout that raised concerns over its safety protocols. Boeing also faces a court hearing related to its offer to plead guilty to fraud, following a settlement with the US Department of Justice. The agreement includes fines and three years of court-supervised probation.
Additionally, Boeing is exploring options to raise billions of dollars, potentially through stock sales or convertible bonds. With $60 billion in debt and operating cash flow losses exceeding $7 billion for the first half of 2024, analysts estimate Boeing will need to raise $10-15 billion to maintain its credit rating, which is teetering just above junk status.
Despite the challenges, Ortberg expressed commitment to making “strategic decisions” to restore the company’s stability.
