Thursday, November 7, 2024

Boeing cuts 17,000 jobs and delays first 777X delivery as strike hurts finances

By Alison Lambert and David Shepherdson

(Reuters) – Boeing will cut 17,000 jobs — 10% of its global workforce — delay the first deliveries of its 777X jet by a year and post a $5 billion loss in the third quarter. – Long strike.

In a message to employees, CEO Kelly Ortberg said the significant reduction was necessary to “align with our financial reality” after 33,000 American West Coast workers halted production of the 737 MAX, 767 and 777 jets.

“We are realigning our workforce in line with our financial realities and more focused priorities. In the coming months, we plan to reduce our total workforce by approximately 10 percent. These reductions include executives, managers and employees,” Ordberg’s news release said.

Boeing shares fell 1.1% in after-market trading.

The dramatic changes are a major move for Ortberg, who came to the helm of the embattled planemaker in August promising to restore relations with the union and its employees.

Boeing reported pretax earnings totaling $5 billion for its defense business and two commercial aircraft programs. On September 20, Boeing fired Ted Colbert from its complex aerospace and defense division.

Boeing, which reports third-quarter earnings on Oct. 23, in a separate release now expects revenue of $17.8 billion, a loss of $9.97 per share and negative operating cash flow of $1.3 billion.

Analysts on average expected Boeing to burn through a negative $3.8 billion in cash for the quarter, according to LSEG data.

Thomas Hayes, an equity manager at Great Hill Capital, said in an email that the layoffs could put pressure on employees to end the strike.

See also  Israel-Hamas war escalates in Gaza crisis: live updates

“Temporarily unpaid striking workers don’t want to become permanently unpaid unemployed workers,” Hayes said. “I would estimate that the strike will be resolved within a week because these workers don’t want to find themselves. In the next 17,000 cuts.

Reaching an agreement to end the strike is critical for Boeing, which filed an unfair-labor-practice lawsuit on Wednesday, accusing the machinists union of failing to bargain in good faith. Ratings agency S&P estimated the strike would cost Boeing $1 billion a month and could cost the company its prestigious investment-grade credit rating.

Ortberg said Boeing has notified customers that it expects the first delivery of its 777X in 2026 due to development challenges, flight test suspensions and layoffs. Boeing has already run into issues with the 777X’s certification, which has significantly delayed the plane’s launch.

“While our business faces short-term challenges, we are making important strategic decisions for our future and have a clear vision of the work we need to do to restore our company,” Ortberg added.

Boeing said it will end its 767 freighter program in 2027, ordering and delivering the remaining 29 planes but continuing production for the KC-46A tanker.

In light of the job cuts, the company said it would end a furlough program for salaried employees announced in September.

Even before the strike began on September 13, the company was struggling to recover from a mid-air panel explosion in January on a new plane that exposed lax safety protocols and prompted US regulators to clamp down on its production.

See also  Joe Biden is urging the UAW and automakers to resume negotiations to end the strike

Boeing faces a court hearing in Texas on Friday before a judge who will decide whether to accept the plane maker’s offer to plead guilty to fraud under a deal with the Justice Department.

Boeing agreed to pay $487.2 million in fines, agree to spend at least $455 million to improve safety, and face three years of court supervision and independent oversight.

On Friday, a federal watchdog said the Federal Aviation Administration was “not effective” in overseeing Boeing manufacturing.

Reuters this week is examining Boeing’s options to raise billions of dollars by selling stock and securities such as stock.

These options include selling securities such as common shares and mandatory convertible bonds and preferred equity, sources said. One of the sources said it suggested Boeing raise about $10 billion.

The company is about $60 billion in debt and has posted operating cash flow losses of more than $7 billion in the first half of 2024.

Analysts estimate Boeing will need to raise $10 billion to $15 billion to maintain its valuations, which are now a step above junk.

“For those of us who have followed Boeing closely, the announcement of delayed deliveries and layoffs at all management and employment levels at the company should come as no surprise as their cash and debt balances dwindle,” said Michael Ashley Schulman, partner at Running Point. Capital Advisors. “Their credit rating and share price have been at risk for the better part of a decade due to mismanagement and the stubbornness shown in the strike may be the straw that breaks the camel’s back.”

See also  Tom Brady shares picture of Bridget Moynahan amid retirement announcement

(Reporting by Alison Lambert and David Shepherdson. Additional reporting by Shivansh Tiwari; Editing by Rod Nickel, David Gregorio and Diane Croft)

Related Posts