Boeing intends to reduce its workforce by approximately 10%.
"Our business is currently in a rut, and it's tough to understate the struggles we're dealing with jointly," mentioned Kelly Ortberg, who took over as CEO at the struggling airplane manufacturer two months back and has been grappling with a 33,000-strong strike by hourly workers for half of his tenure.
The latest statement is just another setback for the struggling airlines manufacturer, which has recorded losses exceeding $33 billion over the past five years. It has also faced a series of serious, sometimes fatal safety blunders and increased oversight from regulators and authorities due to these incidents.
"Navigating our current scenario and rebuilding our company necessitates tough choices, and we'll have to institute structural modifications to ensure we remain competitive and cater to our customers' needs effectively over the long term," Ortberg wrote in a memo to staff last Friday, focusing on "positioning for the future."
Ortberg's memo did not provide the number of positions to be axed, with Boeing boasting a global workforce of 171,000 at the beginning of the year, including 147,000 in the US.
Boeing has been grappling with issues for more than five years, starting with the two tragic crashes of its most popular plane, the 737 Max, in 2018 and 2019, resulting in a 20-month worldwide grounding of the aircraft.
One of its more recent concerns was a door latch on a 737 Max jet operated by Alaska Airlines that dislodged minutes into a January 5 flight, leaving a gaping hole in the plane's side. The plane managed to land without causing any serious injuries, but it sparked a fresh wave of federal investigations into its planes' safety and quality. The preliminary findings of an investigation by the National Transportation Safety Board revealed that the plane had left the Boeing plant without the necessary bolts to secure the door latch two months earlier.
Ortberg stated on Friday that the company must "direct our resources...rather than spreading ourselves too thin over multiple efforts that often result in subpar performance and underinvestment."
The company had already announced unpaid furloughs for a significant portion of its nonunion employees to save money during the strike by members of the International Association of Machinists union. Those furloughs required affected employees to take one week off every four weeks. Friday marked the end of the fourth week of the strike.
Ortberg's announcement means that the next furlough cycle will not happen, he wrote on Friday. Employees will be informed about their specific job statuses starting next week.
"We understand that these decisions will be challenging for you, your families, and our team, and I sincerely wish we didn't have to make them," he wrote. "However, the state of our business and our future recovery necessitate tough actions."
The losses over the past five years have pushed Boeing's debt to dangerous heights, and it's at risk of having its credit rating downgraded to junk bond status for the first time in its history, according to major credit rating agencies. Standard & Poor's estimated that the strike is costing Boeing around $1 billion a month.
Despite the dire financial situation, Boeing had proposed raising wages by 25% over the four-year duration of the proposed contract to IAM members. However, the union members rejected the offer and went on strike starting September 13. The company then increased its offer to a 30% wage hike, but the union leadership stated that wasn't sufficient. Federally mediated talks between the two parties broke down last week.
Even with all its problems, Boeing is unlikely to vanish. It has only one main competitor, Airbus, which also provides full-sized passenger planes for the global airline industry, and it cannot handle Boeing's orders. Boeing has a backlog of orders for its planes that stretches years into the future, as does Airbus. Airlines that are Boeing customers would have to wait five years if they decided to cancel orders from Boeing and move to the back of the line for a similar plane from Airbus.
Among the programs being cut is the 767 jet, which will only be built as a freighter version from now on. Boeing will cease production of that plane once its current orders are fulfilled and delivered to customers in 2027. That plane is manufactured by some of the union members currently on strike.
Ortberg also declared that Boeing's newest widebody passenger plane, the 777X, will face further delays. The company had already revealed that it had suspended test flights due to problems. "We have informed our customers that we now anticipate first delivery in 2026," he wrote.
This is an evolving story and will be updated.
The business struggles have led Ortberg to emphasize the need for structural modifications, aiming to remain competitive and meet customer needs effectively in the long term. Moreover, the ongoing strike with 33,000 hourly workers has significantly impacted the business, with Boeing considering various cost-cutting measures.
