Boeing to Cut 10% of Workforce Amidst Prolonged Strike and Mounting Losses

Boeing, facing a deepening financial crisis and a protracted strike by machinists, has announced plans to lay off 10% of its global workforce. The company’s CEO, Kelly Ortberg, delivered the somber news to employees in a memo on Friday, citing the need for “tough actions” to navigate the current challenges and ensure the company’s long-term survival.

This announcement marks a significant escalation of the crisis at Boeing, which has been grappling with a series of setbacks, including:

• Billions in Losses: The company has incurred losses exceeding $33 billion over the past five years, driven by the grounding of its 737 MAX aircraft following two fatal crashes, the pandemic’s impact on air travel, and cost overruns on key projects.
• Safety Concerns: Boeing has faced intense scrutiny over safety issues, including a recent incident in which a door plug blew off a 737 MAX during flight, further damaging the company’s reputation.
• Labor Strike: The ongoing strike by 33,000 members of the International Association of Machinists (IAM) has halted production at most of Boeing’s commercial airplane manufacturing facilities, exacerbating the company’s financial woes and putting pressure on its supply chain.
• Credit Rating Downgrade Risk: Major credit rating agencies have warned that Boeing’s mounting debt and continued losses put its investment-grade credit rating at risk of being downgraded to junk bond status.

Ortberg, who assumed the CEO role just two months ago, is attempting to steer the company through this turbulent period. He has implemented cost-cutting measures, including rolling furloughs for non-union employees, and is now resorting to layoffs to further reduce expenses and streamline operations.

“Our business is in a difficult position,” Ortberg wrote in his memo. “Restoring our company requires tough decisions, and we will have to make structural changes to ensure we can stay competitive and deliver for our customers.”

The layoffs, which are expected to affect approximately 17,000 employees globally, will impact various parts of the company. Boeing has also announced the discontinuation of its 767 jet program once current orders are fulfilled and further delays to its new widebody passenger jet, the 777X.

The ongoing strike by IAM members has further complicated Boeing’s challenges. The union rejected a 25% wage increase offer from the company, leading to the strike. While Boeing subsequently increased its offer to a 30% raise, the union has remained steadfast in its demands, arguing that the company can afford a more generous package. Negotiations between the two sides have reached an impasse, with no resolution in sight.

Key Takeaways:

• Boeing is laying off 10% of its global workforce, approximately 17,000 employees, as it grapples with mounting losses, a prolonged strike, and ongoing safety concerns.
• The layoffs are part of a broader cost-cutting effort to address the company’s financial challenges and improve its competitiveness.
• The ongoing strike by machinists has further strained Boeing’s finances and hampered its ability to deliver on its order backlog.
• The company’s credit rating is at risk of being downgraded to junk bond status, adding to its financial pressures.

The layoffs and the ongoing strike at Boeing highlight the profound challenges facing the aerospace giant. The company’s ability to navigate these hurdles, resolve the labor dispute, address safety concerns, and restore its financial health will be crucial for its long-term survival and its position as a leader in the global aerospace industry.