Boeing to cut 17,000 jobs and delay first 777X delivery as factory workers’ strike eats into reserves
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” the CEO said, adding that restoring the firm requires tough decisions and the company needs to make structural changes to ensure it stays competitive and delivers to customers over the long term.
The 10% job cuts nearly employee 17,000 positions will be eliminated. The company also plans to delay the introduction of its first 777X jetliner. According to the Bloomberg report, the planemaker has also announced $5 billion in charges across its commercial airplanes and defense businesses. Separately, it expects third-quarter sales to come in well below Wall Street estimates.
The developments come as the stalemate over wages has continued between Boeing and its striking factory workers for about a month now. And, this has led to an extension of the shutdown of the planemaker’s plants. This is the workers’ first major strike in 16 years.
The shutdown of plants is costing Boeing $100 million a day in lost revenue by TD Cowen’s estimates cited by Bloomberg.
In a note on October 10, Jefferies analyst Sheila Kahyaoglu estimated that assuming an average annual salary of $100,000, the job cuts could provide savings of about $1.7 billion in earnings before interest and taxes, “The workforce reductions are what we have seen across smaller suppliers earlier this week, signaling more to come across” the industry, she added.
Earlier in the day, the aircraft maker filed a case of unfair labour practice against the union. Boeing has filed a case with the National Labor Relations Board against nearly 33,000 workers part of the International Association of Machinists and Aerospace Workers that called shutdown of the planemaker’s key commercial manufacturing base on the US west-coast.
The planemaker has alleged that the unit representing the workers had failed to bargain in good faith during the four-week work stoppage. According to the Reuters report, Boeing said the union had engaged in a “pattern of bad faith bargaining, and of issuing misinformation to its members about the status of negotiations.”
On October 9, Boeing also withdrew its offer to the striking workers in the Seattle region as talks between the two sides failed for the third time.
Withdrawing its ‘best and final’ offer, the US aerospace giant said that further talks with the striking workers did not make sense at the time.
The shutdown of plants is costing Boeing $100 million a day in lost revenue by TD Cowen’s estimates cited by Bloomberg.
On September 23, the aerospace giant made an offer of a 30% pay hike over four years to the workers. Instead of direct talks, the communication came through the media with Boeing calling it its ‘best and final’ offer and setting a Friday night deadline for ratification, which angered union leaders.
Before that, workers had rejected Boeing’s initial offer of a 25% pay increase, and the first round of mediated talks broke down last week without a deal being reached.
The union originally demanded a 40% pay hike over three years.
The strike has led to a shutdown of production of Boeing 737s, 767s and 777s and is causing the company to make cost-cutting moves, including rolling temporary furloughs for thousands of non-union managers and employees.
