Boeing is set to announce its second-quarter results today, but the aviation giant has already revealed significant workforce reductions and financial challenges. On Friday, the company stated that it plans to cut 10% of its global workforce, amounting to roughly 17,000 positions. These cuts come in response to a projected third-quarter loss, exacerbated by a month-long machinist strike in the Seattle area, as per a report by AFP.
Boeing CEO Kelly Ortberg emphasized the need to “reset workforce levels to align with our financial reality.” The planned reductions will affect employees across all levels, including executives, managers, and workers. The company also announced a series of cost-cutting measures and delays in production due to the strike, which involved 33,000 machinists from the International Association of Machinists and Aerospace Workers (IAM). The strike, which began on September 13, was in response to a rejected contract offer, the report added.
The strike has added to Boeing’s existing problems, including safety concerns over its commercial aviation division and setbacks in its Starliner space program. The work stoppage is expected to contribute to $3 billion in pre-tax charges to Boeing’s commercial aviation sector for the third quarter, part of an overall anticipated loss of $9.97 per share, as per the report.
Despite these short-term challenges, Ortberg remains focused on Boeing’s long-term competitiveness. “While our business is facing near-term challenges, we are making important strategic decisions for our future,” he said in a press release. Ortberg assured employees that more details on the workforce cuts would be shared next week, as per the report.
The company also announced further delays to the much-anticipated 777X aircraft, with the first delivery now pushed back to 2026 from 2025. Originally expected to enter service in 2020, the 777X has faced repeated delays. Additionally, Boeing said it would cease production of its 767 Freighter in 2027 after fulfilling current orders.
Ortberg also pledged increased oversight of Boeing’s troubled defense and space divisions, which are expected to report significant losses in the third quarter.
Challenges’ triggers
Boeing’s challenges are compounded by legal issues related to the 737 MAX aircraft. A Texas judge heard arguments on Friday over a proposed settlement between Boeing and the U.S. Department of Justice concerning the 737 MAX, which was grounded following two fatal crashes in 2018 and 2019. Family members of crash victims are urging the court to reject the settlement, calling for criminal prosecution of Boeing and its executives.
The IAM strike has shut down production at two Boeing assembly plants in the Seattle area. Union members are demanding substantial wage increases and the reinstatement of their pension plan, citing stagnant wages over the past decade amid rising inflation, the report added.
Boeing has accused the union of making unreasonable demands and recently suspended negotiations after offering a 30% wage increase. A strike rally is planned in Seattle, with union leaders vowing to continue their fight for better terms, the AFP report added. Shares of Boeing fell by about 1% in after-hours trading on Friday.
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