On Wednesday (October 23), Boeing announced a quarterly loss of over $6 billion and stated that it will continue to incur losses in the future. The newly appointed CEO Kelly Ortberg has warned that the aircraft manufacturer must thoroughly reform its culture in order to possibly end a long-standing crisis that has shaken customer and investor confidence in Boeing.
Shortly after the performance announcement, Boeing encountered another setback. Boeing's US factory workers rejected the new labor contract in a union vote, indicating that the 6-week strike will continue to escalate.
On Wednesday, Boeing's stock price fell 1.8% and has already dropped 37.6% from the beginning of the year.
The financial report is not satisfactory
Boeing's financial report released on Wednesday showed that the company's quarterly revenue decreased by 1% year-on-year to $17.84 billion, slightly lower than analysts' expectations of $17.89 billion; The net loss was 6.174 billion US dollars, far exceeding the net loss of 1.638 billion US dollars in the same period last year; The non GAAP core operating loss was $5.989 billion, compared to a loss of $1.089 billion in the same period last year. In addition, the company's backlog of orders amounts to $511 billion, including over 5400 commercial aircraft.
In the third quarter, Boeing also burned nearly $2 billion in cash, bringing the total cash outflow for this year to $10 billion.
The company's Chief Financial Officer Brian West stated that the company will continue to consume cash in 2025 as it prepares to increase production of the 737 Max and expand inventory of the 777X. However, he stated that next year's cash consumption will be lower than in 2024. West added, "There will be a turning point in the second half of 2025, and factory production will resume and recover
Regarding the current financial situation of the company, CEO Otterberg stated that it is too early to say whether Boeing will adhere to its target set in 2022, which is to generate $10 billion in free cash flow by 2025 or 2026.
The newly appointed CEO told employees and investors that Boeing is at a "crossroads" facing various issues such as production quality and huge debt. Serious performance mistakes have led to a loss of trust, an increase in debt, and customer disappointment.
He added that he hopes to stabilize the business and improve the aircraft production process before considering the development of new aircraft.
After joining Boeing, Ottoberg moved his office from Florida to Boeing's manufacturing center in Washington. He also pointed out on Wednesday, "We need to work in the factory workshop, maintenance workshop, and our engineering laboratory, and we need to know what happened
He also stated that 'the company still needs to develop a new aircraft at a suitable time in the future, but before that, we still have a lot of work to do', including repairing the balance sheet to ensure the road ahead.
The 6-week strike will continue
It is worth mentioning that on the same day that Ottoberg made the above remarks, the company's 33000 mechanical workers in Washington were voting on whether to accept the newly proposed labor agreement with the company.
Previously, Boeing's US factory workers had been on strike for nearly 6 weeks, resulting in the airline suspending production of its best-selling jet airliner. It is reported that union mechanics assemble Boeing's best-selling aircraft, the 737 Max, as well as the 777 jet and 767 freighter, at their factories in Renton and Everett, Washington.
The newly proposed agreement includes a proposal for a 35% salary increase within 4 years, which balances the initial demands of the union at 40% and the company at 25%. Additionally, the agreement includes performance bonuses and better retirement benefits. Otterberg said at the performance meeting that he "really hopes" the agreement can end the strike.
However, the newly released voting results were not what Ottoberg had hoped for. The Boeing union stated that 64% of union members voted against the temporary agreement and the strike will continue. Boeing employees also pointed out that the main issue lies in the company's refusal to restore the traditional pension plan that was canceled ten years ago.
Indeed, the agreement did not mention the restoration of fixed welfare pensions, which is of utmost concern to Boeing workers. After a fierce struggle in 2014, many workers were angry about losing their fixed welfare pension, and this sentiment has continued to this day.
This voting result will mean that Boeing will face greater losses. It is understood that Boeing's last strike was in 2008 and lasted for 8 weeks, causing the company to lose approximately $100 million in deferred revenue every day.
Otterberg stated this month that if the strike does not end, the company will lay off 10% of its workforce, approximately 17000 people, in the coming months, "to align with our financial reality.