Boeing to lay off 17,000 employees globally amid strike
US-based aerospace giant Boeing has announced plans to lay off 17,000 employees, and delay the delivery of its 777X jets by a year. The decision comes amid an ongoing strike by West Coast workers that has severely affected the company's operations. The job cuts, which account for a 10% reduction in Boeing's global workforce, are part of efforts to address a projected $5 billion loss in Q3.
CEO addresses workforce reduction
Boeing's CEO Kelly Ortberg conveyed the need for downsizing in a message to employees. He said this massive reduction is necessary "to align with our financial reality" after the strike by 33,000 US West Coast workers, halted production of its 737 MAX, 767 and 777 jets. The layoffs will impact all levels of the company including executives, managers and employees.
Financial struggles and market response
After announcing job cuts and delivery delays, Boeing's stocks fell 1.1% in after-market trading. The company also reported $5 billion in pre-tax earnings charges for its defense business, and two commercial plane programs. Notably, on September 20, Ted Colbert was removed as the chief of Boeing's troubled space and defense unit amid these financial challenges.
Boeing revises Q3 earnings forecast
As it gears up to announce its Q3 earnings on October 23, Boeing has lowered its revenue forecast to $17.8 billion with a loss per share of $9.97. The company also expects a negative operating cash flow of $1.3 billion, which is an improvement from analysts' average prediction of a quarterly cash burn of negative $3.8 billion, according to LSEG data.
Layoffs could pressure workers to end strike
Thomas Hayes, equity manager at Great Hill Capital, suggested the layoffs could pressure employees to end their strike. "Striking workers who temporarily do not have a paycheck do not want to become unemployed workers who permanently do not have a paycheck," he stated. Hayes also believes the strike might be resolved within a week as these employees wouldn't want to find themselves in the next batch of 17,000 cuts.
Labor dispute and credit rating risk
Separately, Boeing has filed an unfair-labor-practice charge accusing the machinists union of not bargaining in good faith. S&P, a ratings agency, estimates the strike is costing Boeing $1 billion per month, and warns the firm risks losing its prized investment-grade credit rating. CEO Ortberg also announced that due to development challenges, flight-test pause, and work stoppage, first delivery of its 777X is now expected in 2026.
Future plans and end of furlough program
Boeing plans to end its 767 freighter program in 2027, after delivering the remaining 29 planes ordered. Production for the KC-46A Tanker will still continue. In light of the job cuts, it has decided to end a furlough program for salaried employees announced in September. Despite these near-term challenges, Ortberg remains optimistic about Boeing's future stating, "We are making important strategic decisions for our future and have a clear view on the work we must do to restore our company."
