Boeing’s CEO informed employees late Friday that the business planned to eliminate 10% of its total workforce “over the coming months.”
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” said Kelly Ortberg, who took over as CEO of the ailing aircraft manufacturer two months ago and has spent half of his time dealing with a strike by 33,000 hourly workers.
The revelation is only the latest blow to the beleaguered planemaker, which has suffered losses of more than $33 billion over the last five years, as well as a number of serious, often fatal, safety violations and greater scrutiny from regulators and law enforcement.
Boeing To Lay Off Roughly 10% Of Its Workforce
“Beyond navigating our current environment, 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 over the long term,” Ortberg wrote in a Friday message to employees regarding “positioning for the future.”
Ortberg’s notification did not specify how many jobs would be slashed, despite the fact that Boeing had 171,000 employees globally at the start of the year, 147,000 of whom were in the United States.
Years of challenges and losses.
Boeing has faced significant challenges for more than five years, beginning with two tragic crashes of its best-selling airliner, the 737 Max, in 2018 and 2019, which resulted in the jet’s global suspension for 20 months. It also incurred enormous losses in 2020, when the epidemic almost halted air traffic and drove airlines to reduce their purchases of new planes.
One of its more recent concerns was a door plug on an Alaska Airlines 737 Max that blew off minutes into a January 5 flight, leaving a gaping hole in the plane’s side.
While the plane landed safely with no significant injuries to passengers or crew, it spurred a new round of federal inquiries into the safety and quality of Boeing aircraft. The National Transportation Safety Board’s preliminary findings revealed that the plane left a Boeing facility two months earlier without the four bolts required to secure the door plug.
Boeing’s space and defense businesses are also losing money. The Starliner spacecraft’s first crewed trip left the two astronauts it carried trapped on the International Space Station for months, rather than the planned short visit.
Ortberg stated on Friday that the corporation should prioritize focusing resources over distributing them over multiple initiatives, which can lead to underperformance or underinvestment.
Boeing has already declared that it will implement rolling unpaid furloughs for a substantial number of its nonunion employees in order to save money during the International Association of Machinists (IAM) strike. The furloughs required the impacted employees to take one week off every four. Friday marked the conclusion of the fourth week of the strike.
The layoff decision means that the next furlough cycle will not occur, Ortberg wrote on Friday. Employees will be told about the future of their respective portions of the organization beginning next week.
“We know these decisions will cause difficulty for you, your families and our team, and I sincerely wish we could avoid taking them,” he texted. “However, the state of our business and our future recovery require tough actions.”
Losses increase during the strike.
Boeing’s debt has skyrocketed during the last five years, and the main credit rating agencies say it is in danger of being downgraded to junk bond status for the first time in its history.
Standard & Poor’s reported last week that the strike, which has halted the majority of the company’s commercial plane manufacturing, is costing them approximately $1 billion per month. Boeing makes the majority of its money when it sells a jet and delivers it.
Despite the poor financial situation, Boeing had offered IAM members a 25% raise during the four-year term of the proposed contract. However, rank-and-file union members nearly unanimously rejected the offer and opted to go on strike beginning September 13.
Boeing then increased their offer to increase salaries by 30%, but the union leadership said it was still insufficient. The union claims that the corporation can afford its salary demands despite its losses, pointing out that wages for its members account for only a small portion of an airplane’s total costs. It blames the company’s years-long losses on poor management.
Federally mediated talks between the two groups ended earlier this week. Boeing claimed late Thursday that it filed a complaint with the National Labor Relations Board ahead of the layoff announcement, alleging that the union is not bargaining in good faith, which the union refuted after the job cutbacks were disclosed.
Boeing To Lay Off Roughly 10% Of Its Workforce
“Bargaining is hard work, and Boeing keeps walking away from the table,” said Jon Holden, IAM president of District 751, which includes the majority of the strikers. “Their complaints about our plans demonstrate their desperation and serve as proof to our members that we are working for them. Our people will become more rebellious and unified as they witness Boeing repeatedly walk away and quit.”
However, wages are not the only concern. Union members are still upset that Boeing forced them to give up their traditional pension plans ten years ago when the firm was doing well financially.
The rank-and-file union members at the time narrowly agreed to the loss of pensions because Boeing threatened to relocate workers from unionized operations in Washington state to other ones it might establish abroad. Boeing canceled the threat in exchange for the loss of the pension schemes.
Boeing is unlikely to go out of business, despite its numerous issues. Airbus is the company’s only competitor in the full-size passenger plane market. However, Airbus does not have enough capacity to handle Boeing’s orders. This is due to the fact that both Boeing and Airbus have long-term order books for their aircraft. If airlines cancel their orders with Boeing, they will have to wait five years for a comparable Airbus jet.
Among the programs being eliminated is the 767 jet, which is now solely constructed as a freighter. Boeing will terminate that plane after the current orders are completed and delivered to clients in 2027. That plane was manufactured by some of the union members who are currently on strike.
The union published a statement stating the announcement regarding the 767’s discontinuation “is very troubling, particularly given the current state of negotiations.” It stated that any decision about the 767 years in the future would have nothing to do with the current strike.
“Boeing is trying to bargain in the press. “It will not work and is detrimental to the bargaining process,” Holden stated. “They are seeking to deal directly with the membership, sowing seeds of mistrust and division within our union. They seek to create a schism inside our union. There is no prospect of that happening. We are stronger than ever and united at every picket line.”
Ortberg also announced that Boeing’s newest widebody passenger airliner, the 777X, will be delayed even longer. The corporation had previously reported that it had been forced to cease test flights due to technical issues. “We have notified customers that we now expect first delivery in 2026,” he stated in an email.
SOURCE | AP
