Boeing Announces it Will Cut 10% of Workforce Amid Strike: Here is What You Need to Know
Boeing has announced that it will cut 10% of its workforce, which equates to approximately 17,000 jobs, as the company faces significant financial challenges exacerbated by a prolonged strike by its machinists. This decision comes as the strike, now in its fifth week, has halted aircraft production, leading to substantial losses for the company. Here’s a detailed breakdown:
- Workforce Reduction: The layoffs will affect about 17,000 employees across various levels, from executives to frontline workers. This move is part of Boeing’s broader strategy to manage costs and navigate through its financial difficulties.
- Financial Impact: The strike has been costing Boeing over $1 billion per month, with the company projecting a loss of about $9.97 per share for the third quarter. This financial strain has led to warnings from credit ratings agencies about the potential loss of Boeing’s investment-grade rating.
- Production Delays: As a result of the strike and internal challenges, Boeing has delayed the delivery of its 777X wide-body plane until 2026, marking a significant delay from its original schedule. Additionally, the company plans to cease production of commercial 767s by 2027.
- Leadership Response: New CEO Kelly Ortberg, in his memo to staff, described the situation as one of the most challenging periods for the company, indicating that these measures are necessary for Boeing’s survival and turnaround.
- Market and Public Reaction: The news has led to varied reactions on the X platform, with some users expressing frustration over corporate decisions impacting workers, while others discuss the broader implications for the aerospace industry and economy.
Estimates from S&P Global put the cost of the strike at roughly $1 billion per month after taking into consideration cost-saving measures the company has taken in response to it.
Earlier this week, the credit rating agency placed Boeing on CreditWatch Negative, which increased the likelihood of a downgrade if the work stoppage continues until the end of the year. Riskier credit makes it more difficult and expensive for companies to borrow money.
S&P expects Boeing will incur a cash outflow of approximately $10 billion in 2024.
As a result, Wall Street analysts expect Boeing will need to raise cash through an equity offering. At the end of the second quarter, Boeing had roughly $58 billion in total debt and $12.6 billion in cash.
This workforce reduction comes at a time when Boeing is also dealing with a tarnished reputation due to previous safety and manufacturing issues, alongside the current labor dispute. The decision to lay off workers, while aimed at cost-cutting, also reflects the broader economic pressures and operational challenges faced by the aviation sector amidst labor disputes and market volatility.
