Faced with ongoing strikes and cash flow shortages, Boeing has decided to lay off employees.
According to CCTV News on October 12th, on October 11th local time, Boeing announced plans to cut 17000 jobs worldwide, with the layoff scale reaching 10% of current employees.
Boeing stated that the strike of its mechanics has exacerbated the company's difficulties and will result in greater losses to its business.
Boeing also stated that it will postpone the production of the new model 777X until 2026, instead of the originally scheduled 2025. Meanwhile, Boeing will cease production of 767 cargo aircraft in 2027 after completing existing orders. But it is stated that the production of KC-46A refueling aircraft will continue.
According to reports from Comprehensive Interface News and China News Service, Kelly Ortberg, the CEO of the company, stated in a memo to employees that the layoffs will include executives, managers, and regular employees, and will take place in the "coming months". As of the end of 2023, Boeing has a total of 171000 employees. Our business situation is difficult, and the challenges we face together cannot be emphasized too much, "Ultraberg said in the memo. He also added that 'significant layoffs are necessary to align with our financial reality'.
Thomas Hayes, the stock manager of Great Hill Capital, stated via email that layoffs may put pressure on employees to end their strike. The striking workers who are temporarily without pay do not want to become permanently unemployed workers without pay, "Hayes said." I estimate that the strike will be resolved within a week because these workers do not want to find themselves caught up in the next batch of 17000 layoffs
The report pointed out that reaching an agreement to end the shutdown is crucial for Boeing, which filed unfair labor practices allegations on Wednesday, accusing the mechanics union of failing to negotiate in good faith. Rating agency Standard&Poor's estimates that the strike causes $1 billion in monthly losses to Boeing, and the company may lose its valuable investment grade credit rating.
According to the International Finance News, the strike by Boeing began on September 13th and involved approximately 33000 mechanics assembling Boeing's best-selling aircraft. Jefferies analyst Sheila Kahyaoglu stated last month that the labor conflict led to the production shutdown of Boeing's "cash cow" 737 Max and other jet airliners.
Boeing just had a falling out with the International Association of Machinists and Aerospace Workers (IAM), the largest union of companies organizing strikes, this week. On October 8th local time, Boeing announced that it had withdrawn its salary proposal to IAM after two days of negotiations with federal government mediators, as the union refused to seriously consider the labor agreement terms proposed by Boeing.
According to China News Service, Boeing has announced that it will terminate the paid employee leave plan announced in September due to layoffs. Before the strike began on September 13th, the company had been burning money as it struggled to recover from the air panel explosion of a new aircraft in January, exposing its weak safety protocols and prompting US regulatory agencies to restrict its production.
On Friday, Boeing faced a court hearing in Texas where judges will decide whether to accept the aircraft manufacturer's proposal to admit fraud under an agreement with the Department of Justice. Boeing has agreed to pay a fine of up to $487.2 million, spend at least $455 million on improving safety, and face three years of court supervised probation and independent supervision.
On Friday, a federal regulatory agency stated that the Federal Aviation Administration has been "ineffective" in supervising Boeing aircraft production.
Reuters previously reported that Boeing is exploring options to raise billions of dollars by selling stocks and similar equity securities. According to sources, these options include selling common stocks as well as mandatory convertible bonds and preferred stocks and other securities. One of the sources suggested that Boeing raise approximately $10 billion.
The report points out that the company has approximately $60 billion in liabilities and a cash flow loss of over $7 billion in the first half of 2024. Analysts estimate that Boeing needs to raise $10 billion to $15 billion to maintain its rating, which is currently one level higher than junk rating.
In addition, the Federal Aviation Administration of the United States stated on the same day that it had issued a safety alert to airlines, warning that the rudder movement of some Boeing 737 models may be restricted or stuck.
On the same day, Boeing released its preliminary results for the third quarter, expecting a revenue of $17.8 billion and a loss of $9.97 per share. Operating cash outflow was $1.3 billion, and as of the end of the quarter, cash and securities investments amounted to $10.5 billion. Boeing will release complete data on October 23rd.
Overnight in the US stock market, Boeing's stock price rose over 3% to $151.02, with a latest market value of $93.054 billion.