Boeing Cost-Cutting measures: Company considering temporary layoffs to save cash during the strike by machinists

Boeing announced on September 16 that it is freezing hiring, reducing travel, and contemplating temporary layoffs as part of efforts to conserve cash during a strike by factory workers that began last week. The company outlined the moves in a memo to employees, emphasizing that they are necessary as “our business is in a difficult period," as quoted by AP.

The company will also cut spending on suppliers in response to the strike, which has involved about 33,000 workers represented by the International Association of Machinists and Aerospace Workers. Workers began the strike after rejecting a proposed 25% wage increase over four years, falling short of their demand for a 40% hike.

Chief Financial Officer Brian West detailed 10 immediate cost-cutting steps, which include halting hiring at all levels, pausing pay increases for managers and executives, and suspending all non-critical travel. “We are also considering the difficult step of temporary furloughs for many employees, managers, and executives in the coming weeks,” West stated," as quoted by Reuters.

Boeing faces challenges amid worker demands and financial losses

Boeing’s financial position has been challenging, with the company reporting over $25 billion in losses since 2019 and burning through $4.3 billion in the second quarter of 2024 alone. The ongoing strike, according to West, is jeopardizing the company's recovery. The delay in new plane deliveries, a vital source of revenue, has added pressure to Boeing’s financial struggles.

Negotiations between the company and the union are set to resume with federal mediators on Tuesday. Union members have highlighted the loss of bonuses, pensions, and other benefits as key sticking points in their rejection of Boeing’s offer. Workers, including Nancie Browning, a long-time Boeing employee, expressed frustration, with Browning saying, “We just want a piece of the pie like everybody else," as quoted by AP.

Boeing also faces potential credit downgrades, with Moody’s placing the company under review, and Fitch warning that a strike longer than two weeks could increase the likelihood of a downgrade. Boeing’s current debt stands at $60 billion, further stressing the company’s financial outlook.

(With Inputs from AP)