Boeing will lay off 10% of its employees as a strike by factory workers cripples airplane production
Boeing plans to lay off about 10% of its employees, about 17,000 people, in the coming months as it continues to lose money and tries to cope with a strike that is crippling production of the company’s best-selling planes.
New CEO Kelly Ortberg told staff in a memo Friday that the job cuts will affect executives, managers and employees.
The company has approximately 170,000 employees worldwide, many of whom work in manufacturing facilities in Washington and South Carolina.
Boeing had already imposed rolling temporary days of leavebut Ortberg said these will be suspended due to the looming layoffs.
The company will further delay the rollout of a new aircraft, the 777X, to 2026 instead of 2025. It will also stop building the cargo version of its 767 aircraft in 2027 after current orders are completed.
Boeing has lost more than $25 billion since the beginning of 2019.
About 33,000 union officials have done so been on strike since September 14th. Two days of talks this week failed to reach an agreement and Boeing has filed an unfair labor practice charge against the International Association of Machinists and Aerospace Workers.
When it announced layoffs, Boeing also provided a preliminary report on its third-quarter financial results — and the news isn’t good for the company.
Boeing said it burned $1.3 billion in cash during the quarter and lost $9.97 per share. Industry analysts had expected the company to lose $1.61 per share this quarter, according to a FactSet survey, but analysts were likely unaware of some big writedowns Boeing announced Friday — a $2.6 billion charge related to delays of the 777X, $400. million for the 767, and $2 billion for defense and space programs, including new Air Force One jets, a space capsule for NASA and a military tanker.
The Arlington, Va.-based company said it had $10.5 billion in cash and marketable securities as of Sept. 30. Boeing plans to release full third-quarter earnings on October 23.
The strike has a direct impact on cash burn because Boeing gets half or more of the price of planes when it delivers them to airline customers. The strike has halted production of the 737 Max, Boeing’s best-selling aircraft, as well as the 777x and 767. The company still makes 787s at a non-union plant in South Carolina.
“Our company is in a difficult position and it is difficult to overestimate the challenges we face together,” Ortberg told staff. He said the situation “requires difficult decisions and we will need to make structural changes to ensure we remain competitive and deliver for our customers in the long term.”
Ortberg took the helm at Boeing in August, becoming the troubled company’s third CEO in less than five years. He has been an executive in the aerospace industry for many years, but a outsider from Boeing.
The new CEO faces many challenges in changing the company.
The Federal Aviation Administration increased scrutiny of the company after a panel blew out a Max during an Alaska Airlines flight in January. Boeing has agreed to plead guilty and pay a fine for conspiracy to commit fraud related to the Max, but relatives of the 346 people killed in two Max crashes want heavier punishment.
And Boeing then got attention for the wrong reasons NASA decided that a Boeing spacecraft was not safe enough to bring two astronauts home from the International Space Station.